Off the Hook, On the Hook? Corporate Responsibility for Environmental Harm Abroad: Latest developments and future perspectives

art by Shar Tuiasoa (Hawai’i, USA)

Alisa Kerschbaum (Leiden University); Anne Fock (European University Viadrina); Patience Ikpehobaulo and Bridget Osakwe (West Africa Network for Peacebuilding)

Activities by transnational companies often seriously impact the environment, challenging States to find appropriate legal responses and to ensure effective access to justice for victims.

Context

In a globalized world, transnational companies (TNCs) conduct business in different settings, including conflict-affected regions. Where local societies suffer from violent conflict, local mechanisms to control the activities of foreign corporations are often weak, opening opportunities for various types of misconduct. In the Niger Delta region, for instance, oil spills and gas flaring caused by oil extracting companies have contaminated local ecosystems.[i] Such damage not only irreparably harms the environment, but also significantly impacts local populations’ physical, social, and economic security.

Under increasing pressure from civil society, more and more States take measures to regulate harmful environmental activities by corporations abroad, resulting in legal frameworks at international, regional, and domestic levels. However, these mechanisms require further refinement, in particular, the adoption of a binding international treaty, the development of effective domestic laws, and ensuring victims of environmental damages have access to justice.

Latest developments

International and regional frameworks:

International environmental law contains obligations of States regarding environmental protection.[ii] The Draft Principles on the Protection of the Environment during Armed Conflict by the International Law Commission,[iii] for instance, ask States to take appropriate legislative measures addressing the environmental impact of corporate behaviour before, during, and after armed conflicts.

Against this backdrop, there is a growing tendency in international law to formulate binding responsibilities of corporations. This development, however, has so far been limited to the corporate responsibility to respect human rights,[iv] and does not explicitly cover environmental risks emanating from corporate behaviour. Some initiatives, such as the OECD Guidelines for Multinational Enterprises,[v] aim at regionally closing this gap but lack binding force. Binding frameworks such as the European Union’s draft corporate due diligence law or the Human Rights Council’s draft treaty on business and human rights are currently being negotiated and are a step in the right direction.

National frameworks:

Correspondingly, several States in the Global North have recently adopted or proposed legislation to regulate extraterritorial business activities of companies domiciled in their territory. Examples of adopted laws include the French Loi de vigilance (2017)[vi] and supply chain laws in Germany (2021)[vii] and Norway (2021)[viii]. Similar corporate due diligence laws are proposed by the governments of Finland, the Netherlands, Austria, and Belgium.

While these approaches reflect increasing willingness by States to regulate transnational corporate activities, three observations are noteworthy. First, most of these domestic laws primarily focus on corporate responsibilities to respect human rights and contain only few, if any, explicit provisions on environmental protection. Second, significant barriers to accessing remedies for victims remain, such as limited resources to bring action before the courts in companies’ home States. Third, the scope of these laws is often limited to larger companies, thus significantly limiting these laws’ applicability.

Case study: Niger Delta region

As one of the largest oil producing regions and one of the most fatally damaged environments worldwide,[ix] the Niger Delta, demonstrates a direct link between negligent corporate activities and environmental harm, as well as the challenges of accessing remedies for victims.

The Nigerian government has passed several laws[x] to prevent and respond to environmental harm caused by the oil industry. However, representatives of local communities have repeatedly criticized these laws as insufficient and have pointed out a lack of compliance by corporations,[xi] resulting in a series of lengthy lawsuits—most prominently against Royal Dutch Shell and its Nigerian subsidiary.

In the early 2000s, Nigerian courts ordered Shell and its partners repeatedly to pay compensation to local communities affected by Shell’s leaking oil pipelines.[xii] Nevertheless, it was only after proceedings before Dutch[xiii] and British[xiv] courts that Shell accepted its responsibilities for two oil spills and agreed to assist in the clean-up.[xv] Notably, Dutch courts also found that the Dutch parent company Shell had violated its duty of care for failing to maintain leaking pipelines. 

This case study reflects three developments. First, the most appropriate and convenient forum for victims of environmental harm to seek justice are the host States’ courts. Second, in absence of effective remedies in host States, victims increasingly turn to courts of parent companies’ home States.[xvi] Third, bringing claims before foreign courts also offers a platform to increase public pressure on TNCs and States to ensure effective protection.

Looking ahead

Existing initiatives regulating corporate environmentally harmful activities abroad are a step in the right direction. However, to ensure effective protection of both the environment and human life, decision-makers should consider the following recommendations:

1. Adopt a comprehensive international framework: Current attempts demonstrate shortcomings of existing initiatives, but also the readiness of the international society to secure TNCs’ responsibilities for environmental harm. Future frameworks need to address TNCs’ responsibilities in a binding manner to ensure minimum standards of corporate accountability.

2. Design effective national laws to strengthen victims’ access to justice: Latest initiatives by States to regulate business activities abroad are a positive development. However, most of these laws require further refinement, in particular, regarding their scope of application, explicit environmental obligations, and effective access to justice for victims.

3. Support capacity building within host States: From a victim’s perspective, the most convenient forum to hold TNCs accountable for environmental damages is the jurisdiction of the State in which harm was inflicted. Bringing cases before TNCs’ home States should remain a complementary mechanism. The international community should focus on strengthening the capacities of host States to investigate these cases to foster peace and development.

Footnotes

[i] UNEP. (2011) Environmental Assessment of Ogoniland, United Nations Environmental Programme: Nairobi

[ii] International law traditionally applies to States and does in principle not include binding obligations directly applicable to corporations. Furthermore, public international law excludes legal issues dealt with by private international law applied to private parties concerning transboundary cases, which are not part of these considerations.

[iii] ILC. (2019) Report of the International Law Commission to the Seventy-First Session UN Doc A/74/10, International Law Commission: Geneva, 208-296.

[iv] An influential framework in this regard is the UN Guiding Principles: UNHCR. (2008) Protect, respect and remedy: a framework for business and human rights: report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, John Ruggie A/HRC/8/5, United Nations Human Rights Council: Geneva

[v] OECD (2000) OECD Guidelines for Multinational Enterprises, OECD Publishing. http://dx.doi.org/10.1787/9789264115415-en

[vi] Loi n° 2017-399 du 27 Mars 2017 Relative au Devoir de Vigilance des Sociétés Mères et des Entreprises Donneuses d’Ordre 2017, Journal Officiel de la République Française No. 74 (https://www.legifrance.gouv.fr/loda/id/JORFTEXT000034290626/)

[vii] Gesetz über die unternehmerischen Sorgfaltspflichten in Lieferketten 2021, Bundesgesetzblatt I No. 46. (https://dejure.org/ext/d463bb21e2f70259010bde07e81454af)

[viii] Lov om virksomheters åpenhet og arbeid med grunnleggende menneskerettigheter og anstendige arbeidsforhold 2021, LOV-2021-06-18-99 (https://lovdata.no/dokument/NL/lov/2021-06-18-99)

[ix] Kadafa, A. (2012). ‘Environmental impacts of oil exploration and exploitation in the Niger Delta of Nigeria’, Global Journal of Science Frontier Research Environment & Earth Sciences, 12(3): 19-28.

[x] For example: Environmental Guidelines and Standards for the Petroleum Industry in Nigeria  (2002), https://www.iea.org/policies/8676-environmental-guidelines-and-standards-for-the-petroleum-industry-in-nigeria-egaspin;  National Oil Spill Detection and Response Agency Act (2006), http://faolex.fao.org/docs/pdf/nig124170.pdf

[xi] For a critical analysis of these legislations see: Mordy, C., I. S. Opeyemi, M. Tonbara and S. Ojo. (2012) ‘Corporate Social Responsibility and the Legal Regulation in Nigeria’, Economic Insights - Trends & Challenges 64 (1): 1-8

[xii] For example: Gbemre v. Shell Petroleum Development Company of Nigeria Ltd. and Others. (2005) Federal High Court of Nigeria Suit No. FHC/B/CS/53/05

[xiii] Milieudefensie et al. v Royal Dutch Shell plc. (2021) The Hague District Court NL:GHDHA:2021:132-134

[xiv] Okpabi and ORS vs Royal Dutch Shell & Anor. (2021) UK Supreme Court

[xv] Vidal, J. (2001) ‘Shell Accepts Liability for Two Oil Spills in Nigeria’, The Guardian (https://www.theguardian.com/environment/2011/aug/03/shell-liability-oil-spills-nigeria)

[xvi] Often supported by international NGOs, such as in this case the Dutch NGO Milieudefensie (“friends of the earth”).