What Is the Evolving Legal Status of Corporations in International Law, and What Are Their Emerging Responsibilities?

Japanese Attorney at Law - Bengoshi L.L.

• 7 min read

Multinational corporations (MNCs) have become dominant actors on the global stage, wielding significant economic power, influencing social and environmental landscapes, and operating across numerous jurisdictions. Traditionally, international law primarily concerned itself with states, viewing corporations largely as objects of national law, whose international relevance arose mainly through the actions of their home or host states. However, this state-centric paradigm is evolving. There is a growing recognition of the profound impact of corporations and an intensifying debate about their legal status, direct responsibilities, and accountability under international law.

Corporations in Traditional International Law: Objects Rather Than Subjects

For centuries, corporations, once established under a national legal system, were not considered subjects of international law with their own direct rights and obligations on the international plane. Their connection to international law was predominantly indirect:

  1. Historical Context – Chartered Companies: In earlier eras, entities like the British East India Company or the Dutch VOC, operating under state charters, performed quasi-sovereign functions, including treaty-making, administration of territories, and even warfare. These were unique historical constructs, blurring lines between private enterprise and state action, as noted in contexts like the Island of Palmas Arbitration (Netherlands, USA) (1928) which dealt with sovereignty tracing back to such entities, or the Sovereignty over Pulau Ligitan and Pulau Sipadan (Indonesia/Malaysia) case (ICJ Judgment, December 17, 2002) which considered acts of administration by such chartered companies. However, with the rise of modern states and liberal economies, such entities largely disappeared, and corporations became firmly rooted in domestic law.
  2. Primary Status as Domestic Law Entities: The modern corporation is a creature of national law. It is incorporated under, and governed by, the laws of a particular state.
  3. Indirect International Relevance via States:
    • Diplomatic Protection: If a corporation suffered injury in a foreign state due to an internationally wrongful act of that state, the traditional remedy was for the corporation's home state to exercise diplomatic protection on its behalf. This, however, is a right of the state, exercised at its discretion. Determining the "nationality" of a corporation for this purpose has been a key issue, with the International Court of Justice (ICJ) in the Barcelona Traction, Light and Power Company, Limited (Belgium v. Spain) case (Second Phase, Judgment, February 5, 1970) emphasizing the state of incorporation and the location of the registered office as primary criteria, rather than a more ambiguous "genuine link." The protection of shareholders, distinct from the company itself, was also significantly limited by this judgment.
    • Objects of State-to-State Regulation: States would conclude treaties concerning trade, taxation, or intellectual property, which would then indirectly regulate or affect corporate activities.
  4. Limited Direct International Legal Personality: Corporations were generally not seen as having direct international legal personality. While some early arbitral awards in the context of large state contracts with foreign companies (e.g., Texaco Overseas Petroleum Company & California Asiatic Oil Company v. The Government of the Libyan Arab Republic, Award on the Merits, January 19, 1977) explored whether such contracts could be "internationalized" and governed by general principles of law or international law, thereby granting the company a limited international standing vis-à-vis the state, this was exceptional and contested.

The Shifting Landscape: Corporations and Modern International Law

The latter half of the 20th century and the dawn of the 21st have brought about a significant re-evaluation of the role and responsibilities of corporations in the international sphere.

A. Corporations as Objects of Heightened International Regulation by States

The sheer scale and impact of MNC operations have led to increased efforts by states to regulate their conduct through international cooperation:

  • Anti-Bribery and Anti-Corruption: Recognizing the corrosive effects of corruption on governance and development, states have collaborated on instruments like the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1997) and the United Nations Convention against Corruption (2003). These treaties primarily place obligations on states to criminalize and prosecute bribery by their nationals and companies.
  • Environmental and Labor Standards: While international environmental and labor conventions (e.g., ILO Conventions) directly bind states, they establish standards that states are expected to implement and enforce with respect to corporate activities within their jurisdiction or control.

In these contexts, corporations remain primarily objects of regulation, with states bearing the direct international legal obligations.

B. The Rise of Corporate Social Responsibility (CSR) and Multi-Stakeholder Initiatives

Beyond state-led regulation, a powerful movement towards Corporate Social Responsibility (CSR) has emerged. Driven by public pressure, consumer awareness, investor demands, reputational concerns, and a growing understanding of the business case for sustainability, many corporations have begun to voluntarily adopt codes of conduct and integrate social and environmental considerations into their operations.

This has led to the development of numerous "soft law" instruments and multi-stakeholder initiatives:

  1. OECD Guidelines for Multinational Enterprises (first adopted 1976, regularly updated): These are government-backed recommendations providing principles for responsible business conduct across a range of issues including human rights, employment, environment, anti-bribery, and consumer interests. They feature a system of National Contact Points (NCPs) to promote effectiveness and handle inquiries.
  2. UN Global Compact (launched in 2000): This voluntary initiative encourages businesses worldwide to adopt sustainable and socially responsible policies based on ten principles in the areas of human rights, labor, environment, and anti-corruption. Companies commit to these principles and report on their progress (Communication on Progress - CoP).
  3. ISO Standards: The International Organization for Standardization (ISO) has developed standards relevant to corporate responsibility, such as ISO 26000 on Social Responsibility, providing guidance rather than requirements.
  4. UN Guiding Principles on Business and Human Rights (UNGPs): Endorsed by the UN Human Rights Council in June 2011, these Principles, developed by Professor John Ruggie, have become the authoritative global framework for addressing human rights impacts related to business activity. They are based on three pillars:
    • The State Duty to Protect: States must protect against human rights abuses within their territory and/or jurisdiction by third parties, including business enterprises.
    • The Corporate Responsibility to Respect: Business enterprises have an independent responsibility to respect human rights, meaning they should act with due diligence to avoid infringing on the rights of others and to address adverse impacts with which they are involved.
    • Access to Remedy: Greater access for victims of business-related abuses to effective remedy, both judicial and non-judicial.

These initiatives, while largely voluntary or "soft law" in nature (not creating direct, binding international legal obligations on corporations in the same way treaties bind states), exert significant normative pressure and shape corporate behavior. They reflect a shift towards viewing corporations not merely as economic entities but as social actors with a role to play in achieving global common goods.

C. Emerging Direct Responsibilities and Debates on Subjecthood

The critical question is whether this evolving landscape is leading to corporations acquiring more direct responsibilities, or even a form of limited legal personality, under international law.

  1. International Criminal Law:
    • Traditionally, international criminal law (e.g., Nuremberg, Tokyo, ICTY, ICTR, ICC) has focused on individual criminal responsibility for core international crimes like genocide, war crimes, and crimes against humanity.
    • The question of corporate criminal liability for involvement in such crimes under international law is more complex and less developed. While some national legal systems allow for criminal prosecution of corporations, there is currently no international criminal tribunal with explicit jurisdiction to try corporations themselves.
    • However, corporate actors can be implicated in international crimes through the actions of their directors, officers, or employees. There is growing attention on corporate complicity in human rights abuses or war crimes, and legal avenues, often through national courts applying international law or universal jurisdiction principles, are sometimes explored. The concept of "aiding and abetting" international crimes by providing means or support is a key area of focus.
  2. Human Rights:
    • As noted, the UNGPs articulate a "corporate responsibility to respect" human rights. This is framed as a global standard of expected conduct, independent of states' abilities and/or willingness to fulfill their own human rights obligations. While not (yet) a direct binding obligation under general international law for corporations in the same way that treaties bind states, it represents a strong normative expectation.
    • There is an ongoing debate at the UN Human Rights Council regarding the development of a legally binding international instrument (a treaty) to regulate, in international human rights law, the activities of transnational corporations and other business enterprises. This reflects a push by some states and civil society organizations for more direct, "hard law" obligations on corporations.
  3. Environmental Obligations:
    • While international environmental law primarily imposes obligations on states, there is increasing expectation and, in some national and regional contexts, direct regulation requiring corporations to adhere to environmental standards, conduct environmental impact assessments, and prevent transboundary harm. The "polluter pays" principle and concepts of corporate environmental stewardship are gaining traction.
  4. Access to Justice for Victims:
    • A major challenge is ensuring effective remedies for individuals and communities adversely affected by corporate activities, particularly when MNCs operate through complex transnational structures. The "Protect, Respect and Remedy" framework of the UNGPs emphasizes the need for both state-based and company-level grievance mechanisms.
    • In the United States, the Alien Tort Statute (ATS) was for a time used by foreign plaintiffs to sue corporations in U.S. courts for alleged involvement in serious human rights abuses abroad. However, recent U.S. Supreme Court decisions, such as Kiobel v. Royal Dutch Petroleum Co. (569 U.S. 108 (2013)) and Nestlé USA, Inc. v. Doe (593 U.S. ___ (2021)), have significantly narrowed the extraterritorial reach of the ATS, making it more difficult to bring such claims.

Challenges in Defining Corporate Status and Responsibilities

Several inherent complexities remain in defining the international legal status and responsibilities of corporations:

  • The "Corporate Veil": The separate legal personality of corporations, and the often complex structures of MNCs with parent companies and numerous subsidiaries in different jurisdictions, can make it difficult to assign responsibility and ensure accountability.
  • Lack of International Consensus: There is no universal agreement among states on the extent to which corporations should have direct, binding obligations under international law, as opposed to being regulated through national law enacted pursuant to state's international obligations.
  • Enforcement Gaps: Even where standards of conduct are articulated (e.g., in CSR initiatives), robust international enforcement mechanisms directly applicable to corporations are largely absent. Enforcement still predominantly relies on national legal systems, which vary in their capacity and willingness to regulate MNCs, or on "soft" reputational and market-based pressures.
  • Voluntary vs. Binding Norms: The debate continues over the adequacy of voluntary CSR initiatives versus the need for more binding "hard law" international regulations for corporations, especially concerning human rights and environmental protection.

The Japanese Context

Japan, as a major capital-exporting nation and home to many prominent MNCs, is actively engaged in these global discussions.

  • Japanese companies are increasingly participating in initiatives like the UN Global Compact and adopting CSR policies, driven by global market expectations and domestic stakeholder awareness.
  • The Japanese government supports the OECD Guidelines for Multinational Enterprises and has established a National Contact Point. It is also engaging with the UN Guiding Principles on Business and Human Rights and has developed a National Action Plan on Business and Human Rights.
  • Japanese company law and tort law provide the primary framework for regulating corporate conduct domestically, including certain aspects of overseas activities, though challenges in extraterritorial application and enforcement remain.

Conclusion

The international legal landscape concerning corporations is in a period of significant transition. Once viewed primarily as national entities indirectly affected by international law through their home states, corporations are now recognized as powerful global actors whose conduct has direct and far-reaching international consequences. While they are not yet "subjects" of international law in the same way as states, a clear trend exists towards acknowledging their responsibilities, particularly in the realms of human rights and environmental sustainability, driven by a combination of state-led regulatory efforts, voluntary corporate initiatives, and evolving societal expectations. The development of robust and effective legal and normative frameworks to govern corporate conduct on the global stage remains one of the key challenges for the international community in the 21st century.