Monika Gurjar
3rd year Law Student at Dharamshastra National Law University, Jabalpur
"Environmental pollution can also cross-national boundaries through decisions made in one state that have an impact on the environment in another"
INTRODUCTION
“A Multinational corporation (MNC), is a company that has business operations in at least one country other than its home country and generates revenue beyond its borders”. In developing country like india, multinational companies are welcomed as they generate employment opportunities and contribute to the overall economic growth of the nation. While benefits brought by the multinational companies are crucial for a developing nation but governments should not close their eyes on the long-term cost of compensating for the damages to the environment caused by the operations of Multinational companies in their territories. This piece brought the attention towards the long- term damage caused by the MNCs in India.
IMPACT OF ACTIVITIES OF MNCs
Economists says that “MNCs follows the pollution haven hypothesis (PHH), whereby multinational companies in order to avoid liability and to cut cost, export their polluting activities through their subsidiaries established in less developed countries”. This act of exporting of pollutants is a major environmental challenge for a developing country. Further, environmental pollution can also cross-national boundaries through decisions made in one state that have an impact on the environment in another. It's not necessary for environmental pollution to travel across national borders in the form of substances. Stated differently, the parent company's regulatory orders are frequently the cause of environmental damage coming from the subsidiary's operations.[1]
MNCs deliberately targets countries that have weak environmental legal framework or lenient environmental laws to shift environment polluting activities in their value chains to those countries. According to the official data of ministry of corporate affairs, there were 5,099 foreign companies registered in India as on 31st January 2023. Further, India serves as market for many MNC that causes plastic pollution in the country, for e.g. Unilever’s plastic pollution footprint is more than 32,000 tonnes per year.[2]
WHY DEVELOPING COUNTRIES?
MNCs operate in developing countries for various reasons; Firstly, they do not have strict environment regulations. Secondly, the environment is not a top priority, and courts are reluctant to bring cases against it, in developing countries. Thirdly, many MNCs operate through their subsidiaries which have separate legal personalities that helps in escaping regulations as “the host state cannot reach the regulatory framework of the parent company which is situated in the home country. For the home state, the subsidiary is located too far from its jurisdictional ambit to cause it to regulate”.[3]
REGULATIONS GOVERNING MULTINATIONAL CORPORATIONS
MNCs are indirectly regulated by multilateral environment agreements between states. The implementation of these environmental rules on a local level by the government of third world countries can pressurise the MNCs to enforce them. However, many countries in order to receive profitable investments, are often unwilling to enforce the environmental standards on multinational corporations. Further, absence of a global environmental liability system is another issue, but it is at least somewhat addressed by the existence of several civil liability systems. The prominent principles include;
“Polluter Pays Principle”; The widely acknowledged "polluter pays" principle states that individuals who cause pollution should be responsible for the expenses associated with controlling it to avoid harming the environment or public health.[4]. Additionally, all civilized jurisdictions have acknowledged (“MC Mehta v. Union of India” [5]and “MC Mehta v. Kamal Nath & Ors”[6]) that the polluting unit should be moved out, if not completely closed.
Strict Liability; The concept of strict liability stipulates that an individual engaged in an activity that is deemed hazardous or intrinsically dangerous bears responsibility for compensating any third party for damages caused by the activity, regardless of whether reasonable care was taken during its execution. The ruling is based on the nature of the activity itself (Union of India J.T. v. Indian Council for Enviro- Legal Action[7]). Therefore, these principles and civil liabilities increases the environmental accountability of these corporations.
CONCLUSION
Multinational Corporations are working without accountability and are deeply damaging the environment because of lack of efficient regulations. Although, multilateral environment agreements MEAs are important in raising environmental standards applicable to MNCs, but their efficiency depends on willingness of the member countries. The rapid growth of multinational corporation in the modern era and the various cases of environment degradation by these corporation necessitates the need for an international law fixing the liabilities of these Multi structural organisations. Legal framework, policies & regulations specifically regulating multinational companies operating in the territories of developing countries are required for their sustainable growth and development.
[1]Vidyaranya Chakravaethy Namballa, Global Environmental Liability: Multinational Corporations under Scrutiny, 1, EWRJ, 181,181 (2014)
[2] learn tearfund.org, https://learn.tearfund.org/-/media/learn/resources/reports/2020-tearfund-the-burning-question-en.pdf, (Jun. 27, 2024, 9:29 PM)
[3] Ibid
[4] London school of Economics and Political Science, https://www.lse.ac.uk/granthaminstitute/explainers/what-is-the-polluter-pays-principle/ ((Jun. 30, 2024, 9:29 PM)
[5] MC Mehta v. Union of India, 1988 AIR 1115
[6] M.C. Mehta v. Kamal Nath, (2000) 6 SCC 613
[7]Indian Council for Enviro Legal Action v. Union of India, 2023 SCC OnLine J&K 1043
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