ASCE’s Twenty Fifth Annual Meeting: “Cuba–What’s next?”July 30-August 1, 2015

Global Corporate Social Responsibility (GCSR) Standards With Cuban Characteristics: What Normalization Means for Transnational Enterprise Activity in CubaLarry Catá BackerW. Richard and Mary Eshelman Faculty Scholar, Professor of Law and International AffairsPennsylvania State University

Context• The 2014 move toward normalization between the U.S. and Cuba has

substantial repercussions beyond the scope of its terms. • For the economic, political and legal sectors, these repercussions touch

on legal or societal constraints of global standards faced by MNEs seeking to operate in Cuba.

• The projection of these global standards within Cuba may pose difficulties and produce pressure for legal-economic reform within Cuba.

• Those pressures may be particularly acute with respect to issues now understood as subjects of corporate social responsibility.

• Two questions arise:– How will the Cuban state incorporate these norm?– How will MNE apply these norms to their dealing within Cuba?

Roadmap• Structure of legal regulation of inbound foreign

investment.

• Evolving international business norms– Soft law– Hard law– Remedial structures

• Points of conflict and convergence– Ideological– pragmatic

Cuban Foreign Investment Law Ley No. 118/2014

• Basic structure evidences competing visions of economic planners – Opening up investment in larger number of economic sectors– Central planning and large state (and military) enterprises will continue to drive the

economy with a small private sector.– Foreign investment will be treated as a species of state to state activity.– Authorization granted on basis of business proposals to the Ministry of Foreign Trade

and Foreign Investment (MINCEX), which relies on Business Evaluation Commission, (8 ministries and the Central Bank of Cub)a, to assess the proposals.

• Implementation clues: Portfolio of Opportunities for Foreign Investment . – Firms must “guarantee” foreign markets, business plans must provide projections on

the impact on the balance of payments.– Cuban government will “favor the diversification of different countries.”– Privatization of state-held enterprises is ruled out (although the transformation of

smaller state businesses into cooperatives in the service and construction sectors is proceeding apace).

– Foreign investment may partner with cooperatives but not with the emerging small-scale private enterprise.

International Norm Structures

• Basic structures• Operation• Link between social

norms, markets, international law and national law

• Hard law—none – New comprehensive

Business and Human Rights Treaty?

• Examples– UN Guiding Principles– OECD Guidelines for

MNEs– BITs with Human Rights

Components– 3rd Party Standards– MNE internal norms

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UNGP– Endorsed by UN Human Rights Council—Including Cuba– 3 part structure

• State duty to protect human rights– Extends no further than legal obligations of state– Opens the door to extraterritorial application

• Corporate responsibility to respect human rights– International bill of human rights– Human rights due diligence– Obligation to work around host state restrictions

• Remedial obligations for states and enterprises– Principally through state– Also international and private mechanisms

OECD Guidelines for Multinationals• The Guidelines are recommendations jointly addressed by governments

to multinational enterprises. – They provide principles and standards of good practice consistent

with applicable laws and internationally recognised standards.– Observance of the Guidelines by enterprises is voluntary and not

legally enforceable.• Cover a number of general areas

– transparency/disclosure, human rights, employment/industrial relations, environmental issues, bribery/corruption, consumer protection, technology transfer, anti-competitive schemes, and taxation

• Complaint procedures through National Contact Points.– Have been used increasingly in two contexts

• NGOs to advance international normative agenda• Labor unions to leverage national litigation

BITs with Human Rights Elements

--Bilateral Investment Treaties typically deal with investment and investment protection--Cuban Bits tend to focus on state prerogatives--Most others

internationalize national lawdiscriminate in favor of foreign investors over domesticstabilization provisions protect investment against later state

law.

--New feature—bringing in human rights norms to business behaviors as a trump to state practice--produce strong enforcement mechanism through arbitration--TPP generalizes the model

3rd Party Private Standards

– GRI (Global Reporting Initiative)• Social, economic and rights based reporting of economic

activity– Private public partnerships

• ISO 26000 CSR– Private organizations

• Certification of compliance with their standards• Monitoring

Internal MNE Norms

– Largest MNEs already have harmonized and sometimes complex systems of CSR based control of its supply and production chain throughout their global operations

• WALMART• APPLE• NIKE• Target• El Cortes Inglés

Convergence

– Pressure from outside?• Almost 5,000 global enterprises have some dealing with Cuba• Most are embedded in international norm systems

– Environmental sustainability as a wedge?– Convergence of norms through BITs?– Embedding through central planning and approval

process in current law? • Internalized macroeconomic planning and policy.

– Imposed by global actors?• part of efforts to join WTO or acquire loans from IMF?• Will the new Asian Infrastructure Bank provide an

alternative?

Conflict

– Issues• Will an enterprise forego its CSR policies as part of an

investment agreement with Cuba• Will foregoing CSR open MNEs to a specific instance before

a National Contact Point?• To what extent will extraterritorial application of foreign

law (US-EU) impede trade deals with foreign MNEs?• Will global certification NGOs be permitted access to MNE

operations in Cuba? If not what ramifications?• What alternatives for MNEs resulting from adverse human

rights due diligence under UNGPs?• Application of rules for weak government zones for Cuba?

THANKSFor more information please contact author at lcb911@gm,ail.com