Accountability in the Global Business Environment
Chapter 4: Extra-territorial Legislation and Corporate Liability
Transnational cases based on harm caused to communities in developing countries by TNCs have recently been litigated in several home states. This chapter examines these cases, and explores how governments and courts in home states have sought to render locally incorporated TNCs legally liable for the effects of their business activities overseas. Many capital exporting nations have attempted to overcome the legal obstacles discussed in Chapter 3, so that parent companies can no longer escape from liability for the actions of their overseas subsidiaries. In particular, legislators have passed, or tried to pass, extra-territorial legislation aimed at regulating the activities of local corporations abroad. Such legislation has included regulatory ‘codes of conduct’ for local corporations drafted to have extra-territorial effect, and statutes aimed at extending the local law of torts to facilitate prosecution of local parent companies for wrongs occurring overseas. Most states also have laws imposing criminal liability on corporations for offences such as money laundering and corruption (especially bribery). The whole question of the extent to which corporations, as legal persons, can be held criminally liable is dealt with in Chapter 5. This chapter explores civil law avenues for rendering TNCs liable for harms caused by their activities outside the home state. A. THE LEGALITY OF EXTRA-TERRITORIAL LEGISLATION AND THE EXERCISE OF STATE JURISDICTION UNDER INTERNATIONAL LAW The main obstacles to the enactment of extra-territorial legislation making parent companies liable for the harmful effects of their activities overseas have been political, not legal. The enactment of extra-territorial legislation...
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