The Impact Of Transnational Corporations On National Economies And The Need For Regulation
The Negative Impact of TNCs on National Economies
World practice has proven that profitable big corporations such as transnational corporations (TNCs) are not necessarily beneficial to the national economies of exporting and receiving countries, and the power of TNCs allows them to ignore these discrepancies. It can be said that today TNCs are practically uncontrollable and this is a very difficult problem, which the world community has been trying to solve for more than 30 years. Many authors point to the manipulation of transfer prices, the circumvention of national legislation in order to conceal income from taxation, the establishment of monopoly prices, dictation of conditions that infringe the interests of host countries, enticing highly qualified specialists from different countries.
In connection with the growing importance of TNCs in the global economy and their impact on individual states, the urgency of regulating the interaction of TNCs with the country of location of the parent company and the host country increases. In 1974, the Commission on Transnational Corporations and its working body, the TNC Center, were established at the Economic and Social Council of the United Nations, which at that time was engaged in the “phenomenon” of companies and the development of a code of conduct. For many years, the UN Commission on TNCs, the International Monetary Fund (IMF) and the World Bank have been trying to create uniform rules of conduct for TNCs (TNC Code of Conduct). The main idea of ??these rules is to ensure maximum freedom of movement of goods and capital, liberalization of national markets.
It is not naïve in the sense that a number of nations have been able to implicate many big corporations and held them responsible for different violations. It should be noted that the host country countries usually regulate the behavior of big corporations through national legislation, without making an official distinction for TNCs and national corporations, and the host countries regulate the activities of TNCs on their territory through national foreign investment laws. For example, in October 6, 2016, the Supreme Court of British Columbia issued a landmark decision authorizing a civil remedy for modern slavery for the first time in a case involving Canadian mining company Nevsun Resources, which operates a mine in Eritrea, Africa. The factual frame of events took place between 2008 and 2012 at the Bisha mine, where three workers alleged that the company would have been complicit with its local subcontractor Segen Construction, who would, in concert with the army, make use of forced labor under inhumane conditions at the mine. These workers took the case to Vancouver, headquarters of the parent company of the mine, in November 2014 on charges of “cruel, inhuman and degrading treatment” and “acts of torture and intimidation”. The study of actions brought before the courts relating to human rights violations by multinationals shows that in recent years, in Canada, civil liability claims seem to open up more promising avenues for victims. Indeed, under Canadian national law, civil liability, which defines the obligation to make good the damage caused to others, can be engaged if a party has failed to act with due diligence to prevent harm or injury to a victim. To engage this civil liability, three conditions are necessary, namely the existence of a willful or involuntary fault, the existence of a damage, and a causal link between the fault and the damage. At common law, involuntary misconduct may result from a breach of the duty of care (or lack of diligence), interpreted as a legal obligation of vigilance, foresight and prudence that leads to avoid acts or omissions that may be likely to cause harm to others. It may also result from the negligence of the author, and would then be unreasonable behavior that may cause harm.
Regulating TNCs: Difficulties and Challenges
Despite the few successful legal redress, it is important to note that most of the corporate violations of human rights often go unpunished due to significant gaps in national and international legal regimes. As shown, some of the less developed countries, in areas where multinationals operate, do not aspire to or are unable to impose sanctions of a criminal nature or to provide effective civil remedies in cases of committing violations of TNCs in their territories within the framework of its national law, the while the home states usually have no jurisdictionon the extraterritorial actions of transnational corporations carried out by their subsidiaries in host states. Thus, the national law of both the Home State and the Host State often does not allow for effectively bringing TNCs to responsibility in the Host States for human rights violations in the territories of the latter. In this regard, the problem of bringing TNCs to responsibility for the violation of human rights on the basis of the norms of international law is of particular importance.
Until now, international law in the field of human rights actually lacks norms and mechanisms that would allow TNCs to be held accountable for human rights violations and thus oblige TNCs to comply with international legal standards of human rights.
While scandals involving large companies such as Shell, Nike or Coca-Cola have been the subject of much debate in emerging countries, recourse against Canadian mining companies, such as Barrick Gold or HudBay Minerals, sued for serious harm human rights, have been increasing in recent years in Canadian jurisdictions. Spotlight on developments in Canadian case law on the violation of human rights by multinationals abroad and on the obstacles to this framework.
Indeed, the multinational company remains a difficult entity to define, since it defines itself as a group, most often large, “operating from a national base [the parent company], and which has established a abroad several subsidiaries in several countries, with a strategy and organization conceived on a worldwide scale. For example, the multinational Anvil Mining, a Canadian mining company exploiting copper and silver in the Congo, illustrates the complexity of such an organization. The company is listed on the Toronto Stock Exchange and the Australian and German Stock Exchanges. Its head office is in Australia, but its shares are only 5% in Australia, while 50% in North America. In 2012, the Chinese company Minmetals Resources acquired 90% of Anvil’s capital, even though it was prosecuted in Quebec by victims for acts of complicity in war crimes and crimes against humanity of a massacre in Kilwa, Congo. The victims, whose appeal was rejected in Quebec, are unlikely to have their cases heard in Chinese courts, which are reluctant to hear cases whose facts have occurred abroad. The large size of these companies and the versatility of their configuration make it difficult to determine the responsibility for human rights violations. In fact, in terms of their structure, it is obvious that this responsibility becomes a difficult exercise. The offenses committed by multinationals are usually complex and hidden, as they are often the result of complicity with local security agents or national contractors who help multinationals bypass local standards.
Inadequacy of Legal Regimes to Hold TNCs Accountable
Conclusion: It is naive
The reality today is that states (especially developing states) are competing with each other in an effort to create the most favorable conditions for big corporations such as TNCs, which sometimes even leads to infringement of the interests of the population living in their territories. In order to encourage TNCs to start activities in a particular country, governments of some developing countries may offer TNCs all kinds of “ benefits ”, ranging from tax breaks and government subsidies to “ weak ” labor or environmental legislation and ignoring gross human rights violations carried out by TNCs
Since 1992, the United Nations Commission on Transnational Corporations no longer exists. Created in the context of the New International Economic Order, its dissolution equates to the entry of the regulation of the activities of transnational corporations (TNCs) in the “legal time” of globalization. Some of the functions of the Commission, including the Inventory of National Regulations on Foreign Direct Investment, have been transferred to another UNCTAD Division. Its main mission, which was to put in place a code of conduct for TNC activities, was definitively abandoned. The dissolution of the Commission can have three meanings. First, the regulation of TNC activities can only be sparse. It consists of disparate solutions of domestic law and international law that, paradoxically, do not recognize TNCs as having a defined legal status. In domestic law, as in international law, the legal status of TNCs is not a status of legal persons but of “private economic powers”. Second, the regulation of TNC activities in the context of globalization is not limited to the regulation of foreign direct investment. The activities of TNCs involve several branches of domestic law whose investment law is only one component. In addition, international law as well as national laws relating to TNCs are subject, in the legal time of globalization, to the imperative of attractiveness. Attractiveness is an economic paradigm that refers to measures taken by host states to attract foreign investors. Globalization has produced a right of attractiveness which is constituted by a normative set aimed at creating the investment climate sought by the TNCs but which exceeds the law of the inciting State. The legal requirements for attractiveness are set by some international organizations, including the OECD, and no longer UNCTAD , occupies a place of first order. The attractiveness of internal laws is assessed according to their compliance with the guidelines of these organizations.? Its implementation requires interaction between TNC strategies and public policies. These three considerations make it possible to understand legally the economic technique of transfer pricing. Transfer price refers to the prices applied by an STN to all the exchanges of tangible and intangible goods occurring in the intra-firm trade developed within its integrated area. Contrary to what is stated by some authors, who express reservations about its existence, empirical studies have measured the extent of the adverse effects of transfer pricing.? TNCs circumvent unfavorable domestic law to benefit from the application of a more favorable domestic law. Domestic laws being deficient, TNCs take advantage of legal loopholes to freely choose their submission to the most attractive domestic law. But the use of the assumption of lawlessness and thesis of the gaps in the law is limiting the legal classification of transfer prices.
Determining Responsibility for TNC Human Rights Violations
Transfer pricing and all the management techniques that allow it to be implemented are acts of circumvention of internal laws. Several branches of the internal laws are concerned by this technique of synthesis. Tax law, commercial law, banking and financial law are only the branches most visibly affected. The complex nature of the transfer pricing technique precludes the discernment of actually circumvented rules. This synthetic technique aims to circumvent several domestic legal orders as well as several branches of internal law. The interconnection of TNC business and financial strategies makes this discernment somewhat haphazard.
The second side of the issue of impunity for multinational companies is to relocate activities to countries where criminal laws are less stringent. In general, polluting factories are located in less developed countries. As a result, disasters resulting from the use of prohibited substances in developed countries do not pose a legal concern to multinationals, as in the case of Shell’s oil spills in the Niger Delta in 2007. The notion of “environmental racism can be used here to describe the phenomenon of racial discrimination that multinationals exhibit when they intentionally violate environmental standards in lesser-developed countries. In developed countries, such as Canada, where human rights legislation is advanced, the reality of the double standard still seems to be observable, since companies that comply with environmental standards do not necessarily apply them in the United States. the countries of the South where they do business.
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