Corporate Liability for Environmental Harm
RESEARCH HANDBOOK OF INTERNATIONAL ENVIRONMENTAL LAW, Ong & Fitzmaurice, eds., Edward Elgar Publishing, 2007
19 Pages Posted: 26 Jul 2009
Date Written: 2007
This chapter explores issues of special relevance to corporate liability for environmental harm. The term environmental harm is employed in a broad sense, including damage to human, animals, plant life, water, soil and so on. Where relevant, a distinction will be drawn between liability for harm to the environment, and liability for damage to human interests which result from harm to the environment.
The first half of the chapter explores some essential conflicts between the legal structure of corporations, and the desire of regulators and victims seeking to hold them liable for their environmental harm. The corporate form is a construct of national legal systems. The specific structure and operation of corporations varies globally, but the basic components are legal personality, limited liability, transferable shares, management by a board and ownership by investors (Hansmann and Kraakman, 2004, pp. 1, 5-15). Of these, it is a corporation's legal personality and limited liability which are of particular relevance to the topic of liability for environmental harm. The former ensures that corporations enjoy many of the same rights as human beings, and some of the responsibilities, but no allowance is made for the fact that they have no soul. The latter affords corporations with substantial opportunities to restrict and even avoid liability for their environmental harm.
The second half of this chapter explores what progress has been made at the international level towards ensuring that corporations are liable for their environmental harm. Corporations, like other non-state actors, have a somewhat fuzzy status under the law of nations. Corporations are primarily the objects, rather than subjects, of the international legal system. They may benefit from certain aspects of international law, such as the provisions of bilateral investment treaties, and there are some international fora in which MNEs have the right to participate, such as the North American Free Trade Association (NAFTA), but in general, corporations must rely on states to advocate on their behalf. However, being an object is not all bad, for it also tends to shield one from being a carrier of liability. Perhaps because states are chary of the prospect of squaring up to corporations and hobbling their own businesses with the costs of their externalities, the general principles of international environmental law, including the polluter pays principle, have not been `explicitly addressed to enterprises' (OECD, 2000, Commentary para 37).
Keywords: Multinational Enterprises, Multinational Corporations, Environmental Law
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