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Magna Carta: Magna Negotium

magna carta

800 years after the signing of the Magna Carta (“the great charter”) in the water meadows of Runnymede, England, what would we include in a modern day version: businesses perhaps? Business, and other powerful non-state actors, risk being overlooked in the development of new international law despite recent efforts. This commentary argues that whilst working towards the next Magna Carta moment, we are missing some significant opportunities along the way.

As we approach May 2015, there will be increasing focus on what the Magna Carta meant in 1215. To misquote the Monty Python team: “What has the Magna Carta ever done for us?” I will leave it to historians to answer this question. Perhaps the elevator version is that it was a historic settlement between the English barons and their King (John), not honoured at the time but which has become symbolic for the rights of individuals more generally – largely because it was repeatedly evoked by reformers between the seventeenth and nineteenth centuries as “fundamental law”. This is nowhere more the case than in the 13 former English colonies in North America and as an inspiration for the US Constitution itself. Some comfort perhaps for the Eton educated British Prime Minister, David Cameron, who when asked on the David Letterman TV show in September 2012 to translate the words from Latin in English – failed, as many of us Brits would, to do so.

But perhaps the more important question is what would a modern fundamental law such as the Magna Carta include today, or is it already happening? In some ways we know the answer, as the 1948 Universal Declaration of Human Rights (and all that followed) delineates that which the Magna Carta did not – the rights of all peoples against the power of every state. But would we stop there? It is often said that there are others in society that have as much power as some governments and therefore they too need to be constrained in the same way as the barons did to King John. We might consider powerful non-state actors such as religious groups, de-facto sub-national governments, powerful NGOs or, of course, business enterprises. And here I don’t just mean accountability under existing national laws, I mean international standards that strengthen national legal and non-legal accountability, but also hold non-state actors to account when their own states cannot or will not. This is perhaps not what libertarians in the US have in mind when they evoke the Magna Carta, but from a social contract perspective the question needs to be asked and answered.

Lets take one of these powerful non-state actors: business. It is often stated that big businesses are more powerful than many governments – that business represents over half of the world’s top 100 economies outstripping the GDP of many states. This sounds impressive and in some ways it is true: some businesses can leverage significant capital, large companies can move markets and strategic business sectors (such as commodities, ICT, finance or labour providers) can indeed impact – positively or negatively – on the ability of governments to provide for the basic needs of their populations.

But it is easy to overstate the power of large business. Unlike in the days of the East India Trading Company, large companies today do not have unbridled power. They do not have their own armies and cannot easily annex territory or assets by force without the connivance of a government. Publicly listed companies are constrained by shareholders and markets. Private companies are more independent but are rarely of the size and scale needed to rank in the top 100 economies. And state-owned companies, such as many of the titans of China or India, are exactly that – controlled at least in part by governmental interests. No one can seriously maintain that the governments of the USA, China or Russia are run by big business – influenced, yes, but sovereign power is still firmly in place.

But the events of the past thirty years, and in particular following the financial crisis within OECD member states, suggests that big business does have a case to answer at least in part, and we might well expect CEOs to be at the table in Runnymede to account for their power. The Rana Plaza factory collapse in Bangladesh two years ago was one such moment, killing over 1,100, but so too was the Bhopal disaster in India thirty years ago and scores of others in between. Each time big business is asked to account for its actions, or its negligence, and then things move on, much as they were before. If the recent allegations against HSBC relating to tax avoidance are found to be true, then we can have little faith in the maxim that “we are all in it together” when it comes to austerity.

Lets be clear, there are many good CEOs out there, and many large companies trying to use their leverage for the good of society, but there also remain systemic problems including those to do with unaccountable power. It is an unavoidable fact that transnational companies have certain advantages due to their supra-national scale, when it comes to transfer pricing between markets or moving production or supply chains between low-cost sources – where perhaps social and environmental protections are not what they should be. Some of these advantages are borderline anti-competitive and privilege large companies over small. But, of course, small companies too can behave recklessly if they choose to do so with bad consequences – think about the power of ICT security providers (note the recent UK Government ruling on “Gamma International” in Bahrain), cut throat recruitment agencies worldwide or rogue mining exploration companies in unstable countries as examples.

At the moment, Governments are divided as to how best approach the thorny issue of extraterritoriality and business – the extent to which companies should be accountable in the legal systems of “home countries” for their actions across borders and particularly in “weak governance” zones around the world. For some, the central issue is impunity – how large companies can sometimes shift assets and money across borders to escape a particular national jurisdiction. For other governments, the central issue is the creation of a leveller playing field for all business – so that those companies registered in weaker or more corrupt jurisdictions are also held to the same environmental and social standards as those based in well-regulated markets. And for some other governments, it is more about hegemony and an effort to prise open market share from the existing main players.

It is unlikely that there will ever be special rules for large companies, but it is likely that we will see more and more international norms for business more generally, particularly those in high-risk sectors or operating in fragile states. It will not be so much “Magna Negotium” as “Omnibus Negotiis” – all businesses – and in particular those businesses that present the greatest potential risk to human welfare. And there will be no single “Magna Carta” moment – instead there are various Runnymede water meadows at which the role of non-state actors needs to be closely examined. Lets just take two examples.

The UK’s Modern Day Slavery Bill will hopefully gain parliamentary assent in March 2015 before Westminster closes for the forthcoming election. Given the undeniable importance of the market and supply chains in perpetuating many aspects of modern-day slavery it seems inconceivable that the original version of the Bill was first introduced into the House of Commons with no reference to business at all. The disclosure requirement that is now in the Bill is the result of committee work in Parliament, and not directly the UK Government itself – the first to develop a national action plan on business and human rights!

And, beyond the UK, the 2014 Protocol to the International Labour Organization’s Convention on Forced Labour, the first since 1930, was agreed by all but one government with only a very weak reference to business due diligence (a reference that some governments and business associations resisted). It will now be up to individual governments to interpret what the business due diligence requirement should actually look like in their domestic law, if they do so at all.

These two examples were important Runnymede moments where businesses were almost missing conceptually and where governments and much civil society seemed unwilling or unable to bring direct corporate responsibility into the tent.

So, for all of those that wait for the next Magna Carta, the time will come – such as in 1215 or 1948 – but things will need to get worse before power will shift in such fundamental terms. In the meantime, do not miss all the other water meadows along the way.