Of all the characteristics of the law it is its predominantly domestic focus which impedes its effectiveness in the regulation of today’s multinational corporations. In the era of the global economy and the reduction of trading and investment barriers, the national law of one particular country alone will be inadequate in controlling corporate behaviour. MNCs operating in more than one jurisdiction are likely to throw around their legal and political weight with impunity. Voluntary codes, whether internal or external, generally suffer from a woefully inadequate monitoring and enforcement system rendering them ineffectual.
This is not to suggest however, that self-regulation – through voluntary codes of conduct – should no longer be pursued or promoted, it simply means that external regulation should supplement and support internal regulation. And likewise, it does not detract from the important role NGOs must play as corporate ‘watchdogs’. For these reasons, nearly all critics propose that an international framework, inclusive of, and supported by, national governments is the most cogent and convincing prospective method of regulation. This framework has been termed the ‘integrated theory of legal responsibility’27.
The integrated theory envisages the combination of different regulatory instruments to deal with each of the above dilemmas, with the aim of maximising efficacy and efficiency. This integration is essential for removing the gaps and establishing effective and compelling regulation. It is crucial, however, that such an international framework does not exclusively, or even excessively, rely upon states to enforce obligations, for doing so would resurrect those very infirmities of the state-centric model that an integrated framework seeks to remedy.
An international enforcement body is absolutely vital. In this regard, it is essential that an organisation such as the WTO takes an active role not just in the formulation, but also the implementation and continuing enforcement of any international rules, and that, without undermining national government sovereignty, they invoke adequate and considerable disincentives to violating regulatory requirements. The UN is not well placed, compared with WTO, to enforce legal control.
As UN Assistant Secretary-General John Ruggie said about Global Compact: “this is not a code of conduct and the UN has neither the mandate nor the capacity to verify corporate compliance”. Director of UNICEF, Carol Bellamy, warned that “it is dangerous to assume that the goals of the private sector are somehow synonymous with those of the United Nations, because they most emphatically are not”29. If any prospective regulation is to be successful then the ‘home’ countries of MNCs – the country of incorporation and profit repatriation – must play a role.
Where MNCs operate at home they are answerable to their governments, yet developed countries have largely failed to take responsibility for the operations of their corporations overseas30. Home states are typically developed countries with a stronger legal and political infrastructure than the typical host states. Extraterritorial regulatory initiatives by home states of MNCs are important because, as compared to the host state, they usually have greater potential to be both viable and effective.
The extent of corporation’s responsibilities will provide long and complex debate, but a few core standards, aligned with current OECD and UN guidelines, should be fairly easily agreed upon. The standards would stipulate the minimum to be expected of the MNCs, and it would be normal business practice to meet them. In summary, the prospects for an international regulatory framework legally controlling MNCs are good. Moves have already been made by specialist international bodies, and an avid interest in corporate behaviour by NGOs will keep the topic high on the international agenda.
As market liberalisation increases, and the power of MNCs with it, the major steps towards control will come. But, as demonstrated in this article, the problems associated with organising, implementing and enforcing control are many. Given the complex nature of the problems at least one thing is almost certain, an integrated regulatory framework, rather than single international, national or internal agreements, is needed.