8 - The Regulatory Framework of Multinational Enterprises

Summary

This chapter examines the main issues and achievements in the process of making MNEs human rights compliant. This involves, first, some understanding of the complexities of MNE organisation to highlight the problematic nature of attributing responsibility within what is a transnational network of interlocking entities linked either by ownership or contract or a mix of both. A distinction is made between integrated corporate group structures and looser transnational production and distribution networks between legally independent firms, often referred to as Global Value Chains (GVCs). Both have the capacity to violate human rights, but each has different control and accountability profiles.Secondly, the chapter will cover the main regulatory problems. These begin with the modalities of regulation. The UNGPs have stressed self-regulation through the corporate responsibility to respect human rights and the use of human rights due diligence (HRDD). MNEs operate as integrated enterprises, and GVCs as production and distribution networks, across national borders, while regulation remains bounded by the limits of sovereign state territory creating tension between the limits of national laws and the transnational nature of human rights claims against MNEs and GVC firms. The remainder of the chapter will cover substantive liability issues.