Multinational Corporations in International Law

by

Menno T. Kamminga

• LAST REVIEWED: 13 January 2014
• LAST MODIFIED: 13 January 2014
• DOI: 10.1093/obo/9780199796953-0049

Introduction

A multinational corporation is a centrally coordinated company that is established in more than one nation-state. A typical multinational corporation comprises a parent company in one state with subsidiaries in one or more other states. There is no uniform terminology, however. The United Nations continues to use the term “transnational corporation,” although many academic authors have dropped that term because of its association with the now discredited New International Economic Order. The International Labour Organization (ILO) and the Organisation for Economic Co-operation and Development (OECD) employ the term “multinational enterprise.” The main difficulty with multinational corporations is the accountability or governance gap caused by the absence of corporate regulation in international law. In traditional international law, multinational corporations have rights but no obligations. In practice, therefore, multinational corporations are subject only to the domestic laws of the different states in which they operate. Since states compete with each other to attract investment from multinational corporations, the regulatory framework applicable to such corporations has a tendency to weaken rather than strengthen.

General Overviews

A couple of books and articles provide general overviews of the position of multinational corporations in international law and the balancing of their rights and duties. The most comprehensive among these works is Muchlinski 2007, summarized in Muchlinski 2009. Interesting early contributions include Vagts 1969–1970 and Seidl-Hohenveldern 1987. Highly critical assessments of multinational corporations and their legal status include Bakan 2004 and Stiglitz 2007.

• Bakan, Joel. The Corporation: The Pathological Pursuit of Profit and Power. New York: Free Press, 2004.

  Highly critical analysis arguing that the corporation functions like a psychopathic personality in its pursuit of profit and power. By a law professor at the University of British Columbia.

• Muchlinski, Peter. Multinational Enterprises and the Law. 2d ed. Oxford: Oxford University Press, 2007.

  DOI: 10.1093/law:iic/9780199227969.book.1

  Now in its second edition, this balanced textbook is by far the most comprehensive monograph on the legal aspects of multinational corporations, covering, inter alia, investment, taxation, group liability, competition, labor, human rights, and the environment. Focuses on both domestic and international law.

• Muchlinski, Peter. “Corporations in International Law.” In Max Planck Encyclopaedia of Public International Law. Edited by Rudiger Wolfrum. Oxford: Oxford University Press, 2009.

  In a nutshell, covers similar ground as Muchlinski 2007. Accompanied by a useful bibliography.

• Seidl-Hohenveldern, Ignaz. Corporations in and under International Law. Cambridge, UK: Grotius, 1987.

  Modest-sized work by a renowned Austrian legal scholar, comparing the international legal personality of corporations with that of international organizations. Still surprisingly relevant for present-day debates.

• Stiglitz, Joseph E. “Multinational Corporations: Balancing Rights and Responsibilities.” Proceedings of the American Society of International Law 101 (2007): 3–60.

  Critical perspective on how bilateral investment and trade agreements favor multinational corporations. By the Nobel Prize–winning economist and former chief economist of the World Bank.

• Vagts, Detlev F. “The Multinational Enterprise: A New Challenge for International Law.” Harvard Law Review 83 (1969–1970): 739–792.

  DOI: 10.2307/1339838

  Eloquently concludes that the multinational enterprise presents a threat to human freedom “because of its capacity to pursue a centralized and coordinated strategy, far removed from the people intimately affected by it” (p. 791). Does not propose ways of regulating multinational conduct, however.