Liability of parent companies for environmental law and labour law abuses brought about by their subsidiaries domiciled in developing countries under international law

Abstract

One of the biggest concerns of today's world is the issue of the negative impact which globalisation could have or is already having on third world countries. This modem day phenomenon is the cause of many protests and discussions all over the globe. It is being discussed .from sociological, economical and, of course, legal points of view. One major abuse which is allegedly taking place is the setting up by parent corporations of large multinational enterprises of subsidiaries in developing countries to take advantage of more lenient legislation in those countries. But is this just an intelligent use of the multinational expansion of business to increase profits or is it crossing the line between use and abuse? The first chapter will deal with the historical aspects of globalisation, which is said to be bringing about abuses in third world countries. This phenomenon is a rather recent one. What brought about this expansion of business production and trade onto a worldwide scale? In what way can the impact really be negative? From a legal point of view is this really bringing about abuses of the international law regime? Here I will talk about the so-called 'race-to-the-bottom' effect which brings about so much concern amongst international law experts. This effect is caused by countries which lower their already low social standards to attract financial investment to that country due to cheaper labour and fewer environmental restrictions. The second chapter will look at two fundamental set-ups dealing with the subject of my thesis under international law: the World Trade Organisation (WTO), which addresses the legal issues of international trade, and the International Labour Organisation (ILO), which deals with international Jabour standards. I will deal with the relationship between these two organisations. It will also be important to see in what way they can stop abuses of environmental law and labour law by multinationals in third world countries. In the third chapter I will enter into the domain of Company Law. More specifically, I will try to identify the legal relationship between a parent company and its subsidiary. I will discuss certain theories which deal with the notions of power and control, as well as centralisation and decentralisation, with the scope of determining whether a parent company should be held liable for liability caused by its subsidiaries. The. aim would be to make the fine/punishment proportional to the entity of the entire company involved and not merely scratch the surface. This would serve to make multinational enterprises more wary of causing abuses. The fourth chapter will deal in detail with the notion of liability under international law. In the preceding chapters I will have looked at the legislation and international organisations involved in controlling international business. I will also have dealt with trying to link the parent company to its subsidiaries/subcontracted companies which are domiciled abroad. In the case where they subcontract another company at some stage of production, it would be incumbent upon them to check that the companies which they are sub-contracting are not breaching any environmental or labour standards law. The fifth chapter will deal specifically with the environmental part of international law. I will dedicate this chapter to a comparative study between the environmental legislation of USA and China to highlight the differences in theory and in practice in this area of law between a highly developed country and a developing country. This will highlight the vital link between politics, social situations and law. At various points throughout the thesis I will refer to case law such as the Bhopal case (1987) in India, the Banana plantation workers case in Texas (1990), the Parker Davis Case (1973) in Argentina and the Swift Delee case (1973) in Argentina - all cases which are relevant to the subject I am dealing with. I will also take a look at conventions and treaties such as the Convention on Civil Liability for damage resulting from Activities Dangerous to the Environment (21 June 1993 - ETS No. 150).