CORPORATE COMPLICITY IN INTERNET CENSORSHIP IN CHINA: WHO CARES FOR THE GLOBAL COMPACT OR THE GLOBAL ONLINE FREEDOM ACT?

Deva, Surya

INTRODUCTION

The involvement of corporations in human rights abuses is arguably as old as incorporation. Corporate involvement in abuses can be traced to as early as the activities of the British East India Company,1 a time when even the notion of human rights in its present form was unknown. In the twentieth century, the corporate complicity2 of IBM and other corporations in the Holocaust,3 Enron in India's Dabhol power project,4 Royal Dutch-Shell in Nigeria's Ogoni region,5 BHP Billiton in Papua New Guinea's Ok Tedi mine,6 and Unocal in Myanmar's Yadana gas project7 have attracted wide media attention, engagement by non-governmental organizations (NGOs), academic critique, and judicial scrutiny.8

The alleged involvement of several leading U.S. corporations - Yahoo!, Microsoft, Google and Cisco - in Internet censorship in China is the most recent chain in this long saga of corporate complicity.9 The Chinese Internet censorship controversy received passionate, multi-faceted responses from various stakeholders, including U.S. Congressional hearings10 and the introduction of the Global Online Freedom Act (Freedom Act),11 establishment of a Task Force by the U.S. State Department,12 a resolution from the European Parliament,13 release of comprehensive reports by Amnesty International and Human Rights Watch,14 pledges by investors for freedom of speech and expression,15 blog exchanges,16 and business school Internet forums.17

This Article seeks to add a new dimension to the existing debate on the controversial role of Yahoo!, Microsoft, Google, and Cisco in Internet censorship in China. The Article critically evaluates the efficacy of two regulatory initiatives - the United Nation's (UN) Global Compact18 and the Freedom Act - in dealing with the specific challenges posed by doing business with or within China. Consideration will be given to how much promise these two initiatives offer in ensuring that corporations take their human rights responsibilities seriously. Throughout the analysis, this Article will advance two specific claims. First, that the Global Compact has failed not only in convincing U.S. corporations to "embrace, support and enact" its ten principles, but also in ensuring that participant corporations seriously fulfill their undertaken commitments. Such a United States-specific inquiry is especially relevant because a significant number of corporations that have been sued for human rights abuses are from the United States.19 The second claim is that, although home-state extraterritorial regulation is a potential option to tame multinational corporations' (MNCs) human rights violations,20 it is unlikely that the Freedom Act will be enacted or, if enacted, achieve its goals - to promote Internet freedom globally by combating censorship by authoritarian foreign governments.

Part II highlights the gap that exists between the guarantees of freedom of speech and expression under the Chinese Constitution and its actual enjoyment outside the Constitution. This Part also captures the factual matrix that has raised allegations of corporate complicity by Yahoo!, Microsoft, Google, and Cisco in Internet censorship in China and analyzes the scope of corporate human rights responsibilities in situations of complicity. Part HI examines the nature, principles, and structure of the Global Compact and then examines, on the basis of available data, the (non) response and (non) seriousness shown by U.S. corporations towards the Global Compact.21 The failure of the Global Compact to take on board even a minimum number of U.S. corporations is a serious limitation for its success. Part IV investigates the scope of the Freedom Act and tests whether the Act could achieve its ambitious goals. The Article concludes with some suggestions on how to overcome the complex challenges posed by corporate complicity in human rights violations.

Apart from the Global Compact and the Freedom Act, the efficacy of several other corporate regulatory initiatives and their application to the current Internet censorship saga could be discussed. These include the Organization for Economic Cooperation and Development (OECD) Guidelines,22 the U.N. Human Rights Norms,23 the U.S. Alien Tort Claims Act of 1789,24 and voluntary corporate codes of conduct. Although analysis of these initiatives would be worthwhile, I am consciously confining the analysis in this Article to the Global Compact and the Freedom Act. The Global Compact is chosen because its first two principles are directly relevant to the instant controversy,25 and also because it is acclaimed as "the world's largest and most widely embraced corporate citizenship initiative"26 and hailed as "one of the Secretary General's most significant achievements."27 The Freedom Act, on the other hand, is selected because it is a specific response to public concern that U.S. corporations are facilitating Internet censorship in China.

II. INTERNET CENSORSHIP IN CHINA

Though China is not the only country that practices some sort of Internet filtering or censorship,28 the issue of Internet censorship in China,29 with or without corporate complicity, is critical for several reasons. First, China is the world's most populous country,30 but with a largely undemocratic form of governance. An effective right to the freedom of speech and expression coupled with a free flow of information and freedom of the press could have provided a means to bring some accountability to the otherwise opaque, centralized government. Internet censorship in China, however, takes away even this slight hope to challenge corruption, environmental degradation, or inequitable development, for example, from about twenty percent of the world's population.

Second, unlike some other countries, Internet censorship runs afoul of several fundamental rights guaranteed under the Chinese Constitution.31 The gap between constitutional text and practice is seemingly so wide and pervasive that Professor Albert H.Y. Chen, a leading scholar on this subject, seems to justify the usefulness of the Chinese Constitution merely on the fact that the government invokes Constitutional vocabulary and terminology to describe its operations.32

Third, although Internet censorship in China is regarded as pervasive, sophisticated, and effective, the government does not admit its existence.33 There is, therefore, no need to even attempt to justify what is arguably an unconstitutional state policy and conduct.

Fourth, censorship in China affects a significant number of Internet users. A 2004 survey conducted by the China Internet Network Information Center found 94 million Internet users, of which about 43 million had access to broadband.34 More recent survey reports indicate the current number of Chinese Internet users to be about 103 million.35 One can, therefore, imagine how critical the issue of Internet censorship, or lack of it, in China is.

Finally, one should not ignore the "China Factor" in the whole censorship saga. Corporate complicity is rooted in the commercial opportunity offered by the Chinese market.36 In 2005, for example, the total revenue from Internet users was about 186 billion Yuan and is expected to rise at the rate of 52.5 percent per year.37 This explains why Yahoo!, Microsoft, Google, and Cisco have chosen to continue doing "business as usual" while appeasing the Chinese government.38 It is doubtful these giant corporations would have behaved similarly elsewhere, say in Myanmar or Zimbabwe.

Against this background, this Part first highlights the gap that exists between the availability of freedom of speech and expression under the Chinese Constitution and its actual enjoyment, and what is lost because of Internet censorship. The Part then maps out the factual circumstances under which the allegation of corporate complicity in Internet censorship in China is made against Yahoo!, Microsoft, Google, and Cisco. Finally, an attempt is made to evaluate both the scope of corporate human rights responsibilities in situations of complicity and the arguments advanced by corporations to justify their operations in oppressive states.

A. Freedom of Speech in China: The Gap between Constitutional Promise and Practice

1) The Chinese Constitution's Failed Promise

On paper, the Chinese Government puts its weight behind free expression. China has signed, though still not ratified, the International Covenant on Civil and Political Rights (ICCPR).39 The Chinese Constitution declares that the "State respects and preserves human rights."40 Article 35 of the Constitution specifically guarantees Chinese citizens "freedom of speech, of the press, of assembly, of association, of procession and of demonstration."41

On its face, the language of Article 35 looks empowering and compares well with similar provisions in international conventions42 or the constitutions of other countries.43 The ambit of constitutional protection afforded to the freedom of speech and expression is further boosted by several other constitutional provisions. The Chinese Constitution protects the freedom and privacy of correspondence,44 declares the personal dignity and residences of citizens to be inviolable,45 and secures freedom of the person, including against unlawful arrest and detention.46 Chinese citizens also enjoy a fundamental right to "criticize and make suggestions regarding any State organ or functionary."47

A 2005 official report, which maps the progress made by China in the year 2004, affirms that "Citizens' freedom of information, of speech and of the press is protected by law."48 Although the report documents various measures that have been taken to promote access to information or the freedom of press, no reference is found of similar steps, if any, that have been taken to safeguard the freedom of speech.49 In fact, the term "speech" is mentioned in the report only once, that is, in the sentence quoted above.50

This should come as no surprise, though. If one looks beyond the constitutional text and official documents, the gap between the theory and practice of human rights in China is quite wide and apparent. The manner in which the Chinese government curtails freedom of speech and press, censors the Internet, muzzles dissent, and incarnates its citizens for criticizing the government or its policies, is well-known and well-documented.51 The 2006 Worldwide Press Freedom Index once again shows that there is no improvement in the situation regarding the freedom of press in China - in a list of 168 countries, China is ranked 163, above only Myanmar, Cuba, Eritrea, Turkmenistan, and North Korea.52 Perhaps Professor Henry Shue had states like China in mind when he wrote that people should not merely "have" rights but should also be able to "enjoy" or "exercise" them.53

2) What is Lost by Chinese Internet Censorship?

Internet censorship, like that performed by the Chinese government, degrades important human rights such as the freedom of speech and expression, right to privacy, right to seek, receive and impart information, freedom of the press, right to communication, and right to protest.54 In some cases, Internet censorship might also violate the freedom of person and endanger the very survival of Chinese citizens.55 Avoidance of these harms should be reason alone to fight such an extensive and coercive practice of Internet censorship. Critics of this stance, however, may note that censorship, with or without the Internet, is common in China and rights are severely restricted anyway.56 Chinese citizens - irrespective of whether they have Internet access - do not enjoy any meaningful freedom of speech.57 But this contention misses one important point about the efficacy of the Internet. It was believed that the Internet's transboundary base and reach would allow it to nullify, to a large extent, the power of repressive states to control and censor the free flow of ideas within their municipal boundaries.58 The current controversy, though, indicates that powerful states can prevail over the might of even the Internet, at least for now.

Continued Internet censorship also denies the citizens of China a chance to reflect and compare the freedoms that they enjoy with freedoms that people are entitled to in other countries. The former Prime Minister of Israel, Shimon Peres, once said:

It seems that the idea of the Internet ... is to provide an additional window to the life of our children. . . . Young men and young women all over the world will ask themselves, why them? Why do they have freedom and we don't? Why are they prosperous and we are not? This will be a great prod to social and cultural change.59

The factor reflected in this passage also explains the roots of Internet censorship in China: if the Internet is a window of change to democracy and freedom, the Chinese government does not want to open this window too wide. Changes are definitely taking places in China, but only in those areas and at a pace dictated by the people's60 government.

This is not to suggest, however, that Internet service providers are not (or should not be) subject to certain restrictions. Like many other rights, the right to freedom of speech, which includes the right to seek, receive and impart information, is not absolute.61 It could be reasonably restricted, say, on the ground of public order, health, morality, or the rights of others.62 For this reason, even corporations that are providing Internet services have to facilitate the freedom of speech, or of press, within such applicable limitations. A corporation should not turn a blind eye, for example, to its website being used to incite terrorism, promote genocide, spread social hatred, sell slaves, or facilitate music piracy.63 But the censorship by the Chinese government, and the corporate complicity therein, has gone too far.

B. Internet Censorship in China: Yahoo! Here Comes Microsoft's Google, but Where is Cisco?

Although the task of Internet censorship in China has been shared by, or "delegated" to64 several Chinese and non-Chinese corporations,65 the conduct of four U.S. corporations - Yahoo!, Microsoft, Google, and Cisco - has attracted special attention from the media, NGOs and even the U.S. Congress. Of these four, Cisco's role has not received as much criticism from Amnesty International66 and Human Rights Watch;67 two comprehensive reports released by these reputed NGOs did not, for different reasons, deal with Cisco's conduct. This section, however, examines the role of all four corporations, each a market leader in their own field and generally seen as a good corporate citizen.68 Their respective policies will be contrasted with their actual conduct.69

1) Yahoo!

Yahoo! was an early arrival in China as "one of the first foreign Internet companies to enter the Chinese market in 1999."70 It, therefore, also took the lead in bowing under the pressure of the Chinese government to cooperate in censorship. Yahoo! China facilitated Internet censorship by maintaining "a list of thousands of words, phrases and web addresses to be filtered out of search results."71 But the worst was yet to come. Beginning in 2003, Yahoo!, or subsidiaries such as Yahoo! China and Yahoo! (Holdings) Hong Kong, provided electronic details and information about cyber-dissidents to the Chinese authorities, leading to many incarcerations.72 This conduct is more questionable, and perhaps indefensible, in that it "assisted the suppression of dissent with severe consequences for those affected."'73 A study conducted by Reporters Without Borders also found 'Yahoo! to be the clear worst offender in censorship," compared to the Chinese version of search engines run by Google and Microsoft.74

In October 2005, Yahoo! merged Yahoo! China with Alibaba.com, a Chinese company.75 This agreement - under which "Alibaba.com owns and operates Yahoo! China, with exclusive rights to the use of the Yahoo brand and technologies in China"76 - was the result of a vision of "long-term strategic partnership in China."77 The most important and immediate benefit of this partnership, however, was that Yahoo! could do business in China without owing any responsibility for its subsidiary's actions, including for complicity in Internet censorship. For example, while defending the role of Yahoo! before a Joint Hearing of the U.S. House of Representatives Subcommittee on Africa, Global Human Rights and International Operations, and the Subcommittee on Asia and the Pacific, Michael Callahan, the senior vice president of Yahoo! observed: "It is very important to note that Alibaba.com is the owner of the Yahoo! China businesses, and that as a strategic partner and investor, Yahoo!, which holds one of the four Alibaba.com board seats, does not have day-to-day operational control over the Yahoo! China division of Alibaba.com."78

The statement, in effect, means that any alleged wrong, if committed at all, was not committed by Yahoo!. One should not, however, be surprised by this stance. Corporate parents keep "distance by design" from their subsidiaries so that they can profit but, if needed, evade responsibility for the conduct of their corporate hands.79 This approach is perfectly legal under principles of corporate law.80 The twin principles of separate personality and limited liability allow parent corporations to organize their business in such a fashion.81

The testimony of Callahan before the Joint Hearing also presented the following as another justification for Yahoo! 's impugned conduct:

When we receive a demand from law enforcement authorized under the law of the country in which we are operating, we must comply. Failure to comply in China could have subjected Yahoo! China and its employees to criminal charges, including imprisonment. Ultimately, American companies face a choice: comply with Chinese laws or leave.82

Callahan's statement can be interpreted as declaring that Yahoo! China's actions were legally mandated if it wanted to continue doing business in China. But, even if true, this raises the question of whether there should be a tipping point at which a corporation doing business in a foreign country should consider withdrawing from the market.83 Will Yahoo!, for example, be ready to do business with or for Al Qaeda simply because of profit maximization?

Obviously, Yahoo! cannot force a decision of withdrawal on all U.S. companies abroad. But it could have made a decision, or threatened to make a decision to leave China, especially in view of its projected corporate values and beliefs.84 Yahoo!, for example, claims to take pride in its 'Yahoo! For Good" campaign and is "committed to making a difference in the world by empowering [its] users . . . with products and services that inspire them to make a positive impact."85 But by providing personal information about its e-mail users to the Chinese government,86 Yahoo! neither acted for "good" nor empowered its consumers. Yahoo! not only belied its belief about the openness of Internet, but also failed to live up to its commitment of providing people with easy access to information.87 Internet access and information exchange hardly seem enticing when fear of incarceration looms large.

2) Microsoft

Microsoft launched the "Chinese version of the Microsoft Network (MSN) online portal" in mid-2005.88 To pacify Chinese authorities, Microsoft started censoring words such as "freedom," "democracy," "demonstration," and "human rights" in its blogs.89 Moving on to the next level of complicity, Microsoft - at the request of the Chinese government as received through its business partner in China - on December 30, 2005, shut down "the popular blog of Zhao Jing, writing under the pseudonym Michael Anti."90 The blog was shut down despite the fact that it was "hosted on servers located" in the United States,91 which meant that Microsoft was not legally or morally bound to adhere to the request of the Chinese government.92

Following the footsteps of Yahoo!, Microsoft also adopted a soft approach towards tolerating censorship while operating its search engine. It seemingly institutionalized within its corporate structure the policy of censoring websites and search results if they contain what the Chinese authorities might consider politically sensitive terms.93 Microsoft's conduct can be interpreted in many ways - appeasement, over-cautiousness, business as usual, or a "race to the bottom."94 But the fact remains that Microsoft is assisting the Chinese government in censorship.

The conduct is more shocking because it does not conform with the company's declared values and policies. Microsoft "is committed ... to help advance social and economic well-being and to enable people around the world to realize their full potential."95 Microsoft also admits that, as a successful global corporation, it has a responsibility to use its "resources and influence to make a positive impact on the world and its people."96 Nothing indicates that Microsoft uses its influence to make a "positive impact" in China in fighting censorship-led oppression.

But Microsoft seems to have learned one lesson from the Yahoo! episode. Rather than bowing to Chinese governmental pressures, it has put on hold the decision to provide Chinese language Hotmail e-mail service for now.97 For how long and how consistently Microsoft will persist with this policy is yet to be seen, however. This is especially true now given that Microsoft has joined the Global Compact.98

3) Google

Google launched its Chinese language search engine, along with Japanese and Korean versions, in September 2000.99 On July 19, 2006, the company announced its decision to establish a research and development center in China, thus indicating its desire for a physical Chinese presence.100 From die time Google launched its search engine in 2000 it faced problems,101 including Chinese government employees censoring search results.102 Beginning in September 2004, this "passive" censorship extended to die Chineselanguage Google news service.103 But this passivity turned active when, "on January 26, 2006, Google launched a censored version of its search engine for the Chinese market in which Google became the censor, not merely the victim of state and [Internet service provider] censorship."104 The search engine blocks results that include terms such as "Tiananmen Massacre."105 Google admits that "[f]iltering our search results clearly compromises our mission."106 The existing policy of active censorship is justified on a "lesser evil" principle107 - providing censored results is better for both the company and Chinese citizens than withdrawing from the market altogether.108

As is the case with Yahoo! and Microsoft, there is a gap between what Google preaches and what it practices,109 though Google does not seem to think so.110 Google claims to make money "without doing evil,"111 as "acting ethically is a core value . . . and an integral part of [its] business culture."112 Google has a declared objective "to make the world's information accessible to everyone, everywhere, all the time."113 In order to "balance" its two fundamental commitments - satisfying the interests of users and expanding access to information - with its policy of self-censorship in China, Google added a new fundamental commitment to be "responsive to local conditions."114

All these principled commitments look nice on paper, but the real difficulty, as the current Internet censorship saga demonstrates, lies in the details of putting these policies into practice. Moreover, these proclaimed values are an example of profit-drivenethics rather than of ethics-driven-profit. Ultimately, it is the "bottom line" that will dictate the meaning and contours of ethical conduct and how the "balancing" has to be done in view of infinite local conditions.

On the positive side, like Microsoft, Google has decided not to offer Gmail e-mail or blogging service in China at this stage.115 Google also declared that it will inform its customers when results are censored,116 and that it will continue to make available its "unfiltered Chinese-language Google.com service."117 Moreover, as compared to other companies, Google "has come closest to acknowledging publicly that its practices are at odds with its principles."118

4) Cisco

As noted, the reports of Amnesty International and Human Rights Watch did not examine Cisco's involvement in Internet censorship in China.119 But others accuse Cisco of facilitating Internet censorship by selling routing devices - "the equipment that makes the Internet and networking work"120 - to China.121 "Cisco is also suspected of giving Chinese engineers training in how to use its products to censor the Internet."122 While appearing at the Joint Hearing, Cisco Senior Vice President Mark Chandler refuted suggestions that selling network devices assists Chinese Internet censorship.123 Chandler stated in categorical terms that "Cisco does not customize or develop specialized or unique [filtering] capabilities, in order to enable different regimes to block access to information" and that "Cisco sells the same equipment to China as it sells worldwide."124 The company denies that it designs and sells products especially for censorship, though admits that the same technology is used for both security and the management of information.125 Furthermore, Cisco does not deny the fact that it sells routing devices to China with knowledge that they may be used for Internet censorship.126

Cisco's corporate citizenship policies can also be juxtaposed with its conduct in the instant situation. Cisco has embraced the Global Compact and has adopted a Code of Business Conduct.127 It "strives to be a good citizen worldwide" and pursues a strong "triple bottom line": profits, people and presence.128 The company claims that, "[a] s the worldwide leader in networking for the Internet, Cisco Systems, Inc. is committed to helping people from all walks of life benefit from the Internet. Cisco was founded in an environment of open communication, empowerment, integrity and trust."129 Cisco is also committed to conducting its operations not only in compliance with local laws, "but also according to globally accepted ethical principles."130

Does one see a mismatch between Cisco's corporate policies and practices? The answer need not be negative. Although Cisco may claim that it "does not in any way participate in the censorship of information by governments,"131 it should be noted that complicity in human rights abuses can take several forms. Complicity need not always be direct - indirect or silent complicity can also attract liability.132 As Edwin Black shows in his book IBM and the Holocaust, for example, it was IBM's punch card machines that allowed the Nazis to identify and eventually eliminate Jews widi ease and efficiency.133 Therefore, a plausible case against Cisco could be made if it knows or has reason to believe diat the supplied technology will be used by China or other countries for political persecutions. More so when Principle 2 of the Global Compact, to which Cisco is a party, provides that businesses should "make sure that they are not complicit in human rights abuses."134

Moreover, independent of the complicity question, corporations should be under an obligation to ensure "that their products are not used for human rights violations by those who purchase diem."135 Irresponsible export of arms - which could be used both for legitimate defense and illegitimate repression of minorities - also raises similar concerns regarding the role of corporations in foreseeable human rights abuses.136 The European Union's Code of Conduct on Arms Exports stipulates that member states "will not issue an export license if there is a clear risk diat the proposed export might be used for internal repression."137 By analogy, it is arguable that Cisco can again be made accountable for supplying technology used for Internet censorship in China,138 as Internet censorship in China is repressive conduct, though on less violent terms. It is unethical to continue exporting a technology to a repressive regime simply because what is at stake are the human rights of people living abroad as opposed to U.S. citizens.139 From the human rights perspective, a policy which seeks to safeguard the human rights only of the citizens of the U.S. or its allies is not only inadequate but also unethical.

On the basis of the foregoing analysis, it can be concluded that in an attempt to maximize profits by capturing the Chinese market, Yahoo!, Microsoft, Google, and Cisco have facilitated Internet censorship in China.140 Of these four MNCs, the conduct of Yahoo! is most reprehensible in that the company direcdy contributed to the conviction of several journalists and activists.141 This is not to say that the other three can escape their share of blame. As responsible corporate citizens, all four could have and should have played a more constructive role in protecting and promoting the human rights of their stakeholders in China. Yahoo!, Microsoft, and Google, for example, could have either continued to operate from servers located outside China, or agree to minimal case-bycase censorship rather than going for the overkill.142 They could also have made "public the list of censored words and phrases"143 and offered tools that would have enabled Internet users to dodge censorship.144 Cisco, on the other hand, could have entered a term in its contracts - also in order to comply with its pledge under the Global Compact - requiring supplied hardware not to be used for human rights abuses.145 Instead of putting more pressure on the Chinese government, however, Yahoo!, Microsoft, Google, and Cisco have opted for an easier and more profitable but less ethical option. Rather than pledging their support for the human rights norms, they have pledged to abide by the "Public Pledge of SelfRegulation and Professional Ethics for China Internet Industry,"146 agreeing to censor as if agents of the Chinese government.

C. Corporate Human Rights Responsibilities Amidst the Complexity of Complicity

To date, no consensus exists on the precise human rights responsibilities of corporations. A uniform definition of corporate complicity is also not available or perhaps even possible. Both, however, are too fundamental to be ignored, and there are constant efforts to better understand and clarify both these issues.147

This section analyzes the issues related to corporate human rights responsibilities in situations of complicity, especially those that have a direct bearing on the role of Yahoo!, Microsoft, Google, and Cisco, in Internet censorship in China. Avenues by which corporations can overcome the complicity quandary within an ethical or human rights framework will also be explored. The section concludes with a critical examination of some common defenses that are raised by MNCs when castigated for their complicity in human rights abuses.

1) Human Rights Responsibilities in a State of Complicity

What are the responsibilities of MNCs generally, or especially when "working in states where the government is unwilling to respect and secure the rights of its population?"148 While corporations possess the potential to influence human rights discourse in both positive and negative ways,149 it is the latter that has received more attention and attempted regulation. Although legally binding rules are almost non-existent, softer norms and scholarship suggest that Yahoo!, Microsoft, Google, and Cisco should be responsible for their conduct in Internet censorship in China.

(i) Identifying Corporate Human Rights Responsibilitues

At least two initiatives - the Global Compact and the UN's Human Rights Norms150 - provide a basis for these companies' human rights responsibilities in China. First, two principles of the Global Compact are direcdy relevant to the alleged involvement of Yahoo!, Microsoft, Google, and Cisco in Internet censorship. Principle 1 provides that "[b]usinesses should support and respect the protection of internationally proclaimed human rights," and Principle 2 lays down that corporations should "make sure that they are not complicit in human rights abuses."151 Of Yahoo!, Microsoft, Google, and Cisco, only Cisco and Microsoft have embraced the Global Compact.152 These principles, therefore, do not technically apply to Yahoo! and Google. From these principles, however, one can still get a feel of how corporations are expected to behave. Moreover, as the Compact's principles are based on the Universal Declaration of Human Rights and, therefore, are not the source but the consequence of corporate human rights responsibilities, they should guide die behavior of even non-participant corporations.153

Second, die U.N.'s Human Rights Norms, which are die first comprehensive attempt to enumerate corporate human rights responsibilities and propose a legally binding mechanism for their enforcement, can shed light on the human rights obligations of Yahoo!, Microsoft, Google, and Cisco.154 The Norms make it clear that "[w]ithin their respective spheres of activity and influence, transnational corporations and other business enterprises have the obligation to promote, secure the fulfillment of, respect, ensure respect of and protect human rights recognized in international as well as national law."155 Paragraph 12 of the Norms further provides, "Transnational corporations and other business enterprises shall respect economic, social and cultural rights as well as civil and political rights and contribute to their realisation, in particular . . . freedom of opinion and expression, and shall refrain from actions which obstruct or impede the realization of those rights."156 By seeking to impose this three-fold human rights obligation on cor- porations,157 the Norms make it clear that corporations should no longer hide behind their primary obligations to their shareholders. For, even if that is their primary duty, it must be performed subject to compliance with human rights norms.

Still unanswered is how these human rights responsibilities are to be discharged while operating in oppressive states that perpetuate or tolerate human rights abuses. It also remains unclear when exacdy an MNC can be considered complicit in human rights abuses. Unfortunately, neither the Global Compact principles158 nor the U.N. Norms offer adequate answers.159 Scholars, however, have tried to provide some guidelines on these questions.160 Andrew Clapham and Scott Jerbi, for example, suggest that "the concept of complicity should be divided into three categories: direct, indirect and silent complicity."161 Complicity is direct when there is an intentional participation in the impugned act with knowledge of foreseeable harm.162 Indirect complicity arises when corporations "knowingly benefit from human rights abuses."163 Silent complicity simply "reflects the expectation on companies that they raise systematic or continuous human rights abuses with the appropriate authorities.164 Yahoo!, Microsoft, Google, and Cisco can all be regarded as complicit in Chinese Internet censorship under both the direct and indirect categories.165 As long as Yahoo!, Microsoft, Google, and Cisco know or have reason to believe that their actions are likely to result in human rights violations, it is not relevant whether they "wish [ed]" for Internet censorship to happen.166

The conduct of Yahoo!, Microsoft, Google, and Cisco can also be tested vis-à-vis a negative definition of complicity. In accordance with this definition, MNCs should be regarded as non-complicit in human rights violations only if their "operations in the country are small enough to have no real effect on either the government's ability to hold power or on the political activities in the area of operation."167 But in no way can Yahoo!, Microsoft, Google, and Cisco claim that they are small fish in the sea of the Chinese market, or that they have no power to influence how and what decisions are made by the Chinese government.

(ii) Guidance for Corporate Response Amidst Allegations of Complicity

Scholarship also provides some guidance on what corporations should do when they suspect, or their stakeholders accuse them, of complicity in human rights violations. An "ethical algorithm" developed by Professor Thomas Donaldson provides a useful guiding tool in situations such as this.168 Should MNCs like Yahoo!, Microsoft, Google, and Cisco cooperate with the Chinese government in Internet censorship (something that is legally or morally impermissible in the home country) , or withdraw from the market of such a host country? Donaldson proposes two complementary tests to judge two distinct types of situations - one, where the conflict between practices is due to "the host country's relative level of economic development," and, second, where the conflict is "independent of the host country's relative level of economic development."169 The current case is covered by the second category in that Internet censorship has hardly anything to do with the economic development of China. In such a situation, Donaldson argues, compliance with local practice will be permissible only if two conditions are satisfied. First, it is not "possible to conduct business successfully in the host country without undertaking the practice," and, second, the practice does not constitute "a clear violation of a fundamental international right."170 Yahoo!, Microsoft, Google, and Cisco may satisfy the first but not the second condition because Internet censorship shall fall afoul of several fundamental international rights listed by Donaldson, e.g., the right to physical security, the right to a fair trial, the right to freedom of speech and association, and the right to political participation. Therefore, Yahoo!, Microsoft, Google, and Cisco should have explored options other than following an impermissible local practice of Internet censorship.

Margaret Jungk, Senior Advisor to the Danish Centre for Human Rights, also canvases a range of options as to what corporations can do in such a situation - from remaining neutral to pursuing quiet diplomacy, undertaking projects to support human rights at the ground level, publicly condemning the violations, negotiating publicly with the government, and disinvesting from the state.171 Yahoo!, Microsoft, Google, and Cisco could have considered these pyramidal options in China. But these companies neither remained neutral nor explored the possibility of invoking Jungk's remaining options in the pyramid. One explanation for this might be that ethical concerns are "widely neglected" by corporate managers, including because untrained personnel deal with what they consider "amorphous [human rights] questions."172 Although Yahoo!, Microsoft, Google, and Cisco adequately considered legal, political and economic dimensions of their decisions, the ethical side was largely ignored beyond making rhetorical statements.173

(iii) Complicity and Corporate Parenthood

Existing regulatory initiatives have given little attention to the responsibility of a parent corporation for complicity by its subsidi- aries in human rights violations. It is suggested here that the parent corporation should not be allowed to distance itself - as Yahoo! tried to do with Yahoo! China - from complicity by subsidiaries.174 Of course, the well-established principle of separate personality should be given the respect and deference that it deserves, but no more. A corporation is called "parent" in the first place only when it exercises a significant amount of control over the affairs of its subsidiaries.175 Instead of litigating afresh the question of relationship, and the extent of control, between the parent and its subsidiaries, the factum of control should be used to raise a refutable presumption that the parent shall be liable for human rights violations by its subsidiaries. The separate personality of the subsidiary should be "eclipsed" for a limited time and purpose when it comes to human rights violations.176

In addition, courts should apply an objective, not subjective, test to determine if the parent exercised enough control over the complicit subsidiary to trigger the above presumption. Courts' preferences to apply an objective test over a subjective test are deeply entrenched in several areas of law,177 and there is no reason why the objective test should not also be invoked to decide the relationship of corporations within a corporate group. Courts should not only look at how the parent corporation perceives its relation with its own subsidiaries but also consider how other external stakeholders see that relationship.178

Applying the above framework of corporate human rights responsibilities, it is safe to conclude that Yahoo!, Microsoft, Google, and Cisco in different ways encouraged, facilitated, or assisted in Internet censorship in China.

2) Evaluating Common Corporate Defenses

Once complicity in human rights abuses is alleged, MNCs often do what Yahoo!, Microsoft, Google, and Cisco have done regarding their action in China - advance multiple justifications for their behavior.179 These positions are often presented by the company as the best (or only) practical option.180 Some of these common corporate justifications are examined below in order to assess their merit.181

(i) Blame the State

MNCs often pass on the major responsibility for human rights realizations and human rights abuses to the states in which they operate. A Joint Statement by Microsoft and Yahoo! to the U.S. Congress Human Rights Caucus illustrates this: both companies "think [that] there is a vital role for government-to-government discussion of the larger issues involved" because, acting alone, corporations' "leverage and ability to influence government policies in various countries is severely limited."182 In recent times, however, corporations have started conceding that they, too, have a role to play in the realization of human rights, or at least in ensuring that they are not complicit in human rights abuses.183 Nevertheless, corporations still claim that they possess limited mandate, influence, or legitimacy to go far alone.184

States, no doubt, have primary responsibility to ensure the protection and promotion of human rights.185 But this does not establish that other entities which are now in a position to breach human rights could not have similar, if not identical, responsibilities.186 Several changes in the interrelation of states, individuals, and corporations require a reorientation of duties, and a re-conceptualization of duty bearers so as to more robusdy protect human rights.187 MNCs are suitable candidates to bear such duties,188 and they are not disqualified merely because their primary responsibility is wealth maximization.189

(ii) The Lesser of Two Evils Argument

Multinational corporations also often contend that withdrawal from a market is not going to make any positive impact. They argue that other companies, some of which might have a worse human rights record, would simply replace them.190 Such an argument - which invokes "lesser evil" rationale - is well-known, but is ethically unsound. What Bishop Tutu said with reference to apartheid sanctions applies to the present situation as well: "Not complying with sanctions just because somebody else is out there who will not comply, is just like seeing a girl hitch hiking along the road, and picking her up and raping her, as surely, somebody else will come along and do it anyway."191

If Yahoo!, Microsoft, Google, and Cisco were to decide not to cooperate with the Chinese government in Internet censorship, would it have made the situation worse for consumers of Internet in China? Public statements by Yahoo!,192 Microsoft,193 and Google194 clearly show that these corporations believe that Chinese citizens would be worse off by their withdrawal from the Chinese market. But these statements are both hypothetical and speculative. One wonders if the bottom lines of these MNCs are more adversely affected by their non-cooperation with the Chinese government in Internet censorship than the interests of the Chinese people are adversely affected by the withdrawal of the MNCs.195

(iii) More Harm than Good

A related justification that MNCs like Yahoo!, Microsoft, Google, and Cisco put forward is that, by withdrawing from a state with poor human rights record, the companies lose the chance to improve the human rights situation by actively engaging the local community and government.196 Microsoft's case against withdrawal is, in fact, rooted in human rights protection: "[B]ased on grounds of human rights and freedom of expression alone, Microsoft believes that we should continue to provide our Internetenabled services in China."197 This is an attractive as well as workable proposition.198 Stakeholders like Amnesty International "would like [corporations] to act as a 'force for the good' in becoming part of the solution towards improving the human rights situation in China."199 But it is not known how many MNCs which decide to stay actually engage and force a change for the positive.200 Also, once profit has taken precedence over ethical or human rights principles, reversing that order will not be easy.

(iv) Requirement to Follow Local Standards

Another very common plea taken by MNCs is that in order to do business in different parts of the world, they have no option but to follow local laws and standards.201 This argument has echoed in the explanations issued by Yahoo!, Microsoft, and Google.202 Google, for example, now concedes that it is not its policy "to censor search results. However, in response to local laws, regulations, or policies, we may do so."203 Google's mission "to facilitate access to information for the entire world"204 required it to compromise its "Don't be evil" policy in China.205 Implicit in this argument is the moral assertion that by importing non-local laws and standards MNCs will deny local people the right to judge what is best for themselves.206

No doubt, MNCs should keep in mind "morally relevant" differences207 while operating under diverse social, cultural, economic, and political environments.208 But the argument overstates, as well as understates, its case for what laws MNCs need to follow while operating in different markets. The case is overstated in its assumption that compliance with local laws ousts the possibility of complying with international or national law of the home state at the same time.209 The argument should not be stretched to apply to those situations where simultaneous compliance with both global and local laws is by and large possible. Additionally, MNCs should at least resist complying with those local laws which are likely to contravene the constitution of the country210 or international human rights law.211 Moreover, if the local laws are vague, unclear or leave room for discretion,212 the leeway should be judiciously used to promote human rights.

The corporate justification of being bound by local laws understates its case by suggesting that MNCs need to take into account only local laws. MNCs, however, are required to observe a catena of non-local laws,213 some of which could be part of even international customary law. Senator Christopher H. Smith while speaking to the U.S. House of Representatives observed:

When Yahoo was asked to explain its actions, Yahoo said that it must adhere to local laws in all countries where it operates. But my response to that is: if the secret police a half century ago asked where Anne Frank was hiding, would the correct answer be to hand over the information in order to comply with local laws? These are not victimless crimes. We must stand with the oppressed, not the oppressors.214

(v) Everyone is Doing It

Finally, MNCs sometimes try to justify their conduct by suggesting that "everyone is doing it." This can be used as both a justification of one's conduct and as proof of the impugned conduct not being "really harmful or undesirable."215 Professor Ronald Green proposes five conditions on the satisfaction of which "it is morally permissible to adopt an otherwise undesirable but prevalent practice . . . ."216 The five conditions are as follows:

1. Refraining from this behavior will unavoidably cause you (or those you care for or for whom you are responsible) serious harm or loss.

2. Your engaging in this behavior will not also cause significan Uy more harm or loss to others.

3. Your engaging in this behavior will not lead ouiers to engage in it in ways Üiat are equally or more harmful, and this would be true if your engaging in this behavior were to become public knowledge.

4. Your refraining from this behavior will not lead others to refrain from it, and this would be true if your refraining from this behavior were to become public knowledge.

5. Your refraining from mis behavior will unavoidably lead others to engage in it in ways diat are substantially more harmful than would have been the case had you chosen to engage in it from yourself, and this would be true if your refraining from this behavior were to become public knowledge.217

Applying the test to the present scenario, the four MNCs could satisfy the first condition by arguing that refraining from censorship would "unavoidably cause" serious harm or loss to them. But their case would falter at the second condition - their involvement in Internet censorship in China "also cause [s] significantly more harm or loss to others."218 It is the conduct of Yahoo!, Microsoft, Google, and Cisco that has facilitated or strengthened the censorship initiatives of the Chinese government.219 Of these, Yahoo! 's conduct is more blameworthy because it disclosed the identities of its users and provided necessary evidence that led to the conviction of several journalists and activists.220

III. THE GLOBAL COMPACT AND CORPORATE COMPLICITY IN INTERNET CENSORSHIP: DID IT MAKE A DIFFERENCE?

While speaking at the World Economic Forum in Davos, Switzerland, on January 31, 1999, UN Secretary General Kofi Annan challenged business leaders to embrace core principles in the areas of human rights, labor, and the environment.221 The idea soon blossomed, and the Global Compact was officially launched in New York on July 26, 2000.222 In the last seven years, the Compact flourished so much that now it is acclaimed as "the world's largest and most widely embraced corporate citizenship initiative."223 But has the Global Compact really changed how business is conducted around the world? This Part explores the extent to which the Global Compact has succeeded in convincing U.S. corporations - which have been at the center of both bad publicity and court action regarding human rights abuses224 - to behave as socially responsible (or responsive) citizens. After a brief summary of the Global Compact, its major limitations will be discussed, followed by an analysis of its effectiveness in changing the behavior of U.S. corporations abroad.

A. Global Compact: What It Is and What It Is Not

The Global Compact is a multi-stakeholder initiative involving diverse actors such as governments, companies, labor and civil society organizations, and the United Nations.225 The Global Compact originally consisted of nine principles in the areas of human rights, labor, and the environment.226 On June 24, 2004, during the Global Compact Leaders Summit, a tenth principle related to "anti-corruption" was added after extensive consultation with all the participants.227 The ten principles enjoy "universal consensus" and "are derived from" the Universal Declaration of Human Rights, the International Labor Organization Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the U.N. Convention against Corruption.228

The Global Compact "in its simple form is the dissemination of and adherence to good business practices."229 It calls upon business enterprises to "embrace, support and enact, within dieir sphere of influence, a set of core values" in the four covered areas: human rights, labor, environment, and anti-corruption.230 The ten principles of the Global Compact are quite ambitious in their scope and try to "fill a void between regulatory regimes, at one end of the spectrum, and voluntary codes of industry conduct, at the other."231 To participate in the Global Compact, the chief executive officer of an organization must send a letter to the U.N. Secretary General expressing support for the Global Compact and its principles.232 The participant is also expected to set in motion changes to its business operations, publicly advocate the Compact and its principles, and also publish - through an annual sustainability report or otherwise - the steps taken to implement the principles.233

The Global Compact pursues two "complementary goals."234 First, it makes efforts to internalize its principles as part of business strategy and operations.235 Secondly, it facilitates "co-operation and collective problem-solving between different stakeholders."236 At a wider level, the vision of the Global Compact is "to promote responsible corporate citizenship so that business can be part of the solution to the challenges of globalization."237 Good corporate citizenship could contribute, for example, to establishing a "more sustainable and inclusive global economy."238 The Compact is, thus, an attempt to engage corporations in overcoming the side effects of globalization.239 The Global Compact seeks to achieve its objectives through four engagement mechanisms: leadership (promoting initiatives supporting the Global Compact at all levels) , dialogues (engaging in policy dialogues with all concerned stakeholders), learning (enabling dissemination of best business practices through sharing of "examples" and "case studies"), and outreach/network (providing action platforms, including promotion of public-private partnerships projects).240

The Global Compact, however, "is not a regulatory instrument - it does not 'police', enforce or measure the behavior or actions of companies."241 It is not even a "benchmarking system that measures good and bad."242 Since the Global Compact is a "learning dialogue and a platform of action," it relies on a range of unconventional means and strategies to promote respect for its principles.243 These include principle-based change, risk management, public accountability, the enlightened self-interest of companies, sharing good practices, and partnerships.244

B. Major Limitations of the Global Compact

The Compact Progress Report,245 various case studies,246 examples by companies,247 and a report on impact assessment prepared by McKinsey & Company248 document the progress and outreach that the Global Compact has achieved since its inception. But many limitations have also surfaced during this evolutionary journey. These include directional uncertainty, vague principles and concepts, the lax requirement for communication on progress (COP), a lack of verification and independent monitoring, and a misappropriation of the Compact's image.

1) Directional Uncertainty

The Global Compact still faces a directional amorphousness - uncertainty over what it wants to achieve and what it leaves to be achieved by other regulatory initiatives. Despite the express assertions that the Compact is neither a regulatory framework (as a substitute for government regulation or otherwise) nor "positioned to compete with other voluntary initiatives,"249 it in effect does both. The Compact tries to regulate (through a system of voluntary selfregulation), but at the same time seems to dwarf other similar voluntary initiatives.250

One of the Compact's official documents expressly boasts of its comparative advantage vis-à-vis other corporate citizenship initiatives with the following: "The Global Compact's comparative advantage rests in the universality of its ten principles, the international legitimacy and convening power of the United Nations, and the Compact's potential to be a truly global platform with appeal not only in industrialized countries, but also in the developing world."251 Secretary General Annan also emphasized this advantage recently, saying that "the Global Compact has been endorsed by all UN member states, giving the initiative unprecedented access, including in countries where others have difficulty gaining access alone."252 Contrary to the declared non-competitive nature of the Compact, these statements clearly assert why corporations should choose to come under the umbrella of the Global Compact rather than other existing initiatives.

2) Vague Principles and Concepts

In addition to a lack of directional certainty, the Compact's principles and concepts are too vague to provide adequate guidance to corporations about the conduct expected from them.253 U.N. Special Representative on Business & Human Rights John Ruggie notes that many of the Global Compact's "principles cannot be defined at this time with the precision required for a viable code of conduct."254 The ten principles of the Global Compact are basically "one-liners,"255 and perhaps deliberately kept so in order to make the Compact more attractive for corporations.256 At this stage, therefore, the Global Compact at best is an example of a "minimalist code" of corporate conduct.257

The generality and vagueness of the Compact principles is counter-productive from the perspective of both sincere and insincere corporate citizens.258 Insincere corporations can easily circumvent or comply with the principles without doing anything to promote human rights or labor standards.259 A sincere corporate citizen, on the other hand, may find the language too general to be implementable.260 A certain level of generality or flexibility in the guiding principles of any international initiative is a desirable virtue,261 but not if, as in the case of the Global Compact, it can be manipulated to include or exclude anything at the convenience of an individual corporate actor.

The vagueness of the Compact principles is further buttressed by the use of concepts which themselves do not currendy have a definite meaning. Take, for example, the terms "complicity" and "sphere of influence." The Compact's statement that businesses should "make sure that they are not complicit in human rights abuses"262 does not go far enough in helping corporations to identify situations of complicity that should be avoided. What amounts to complicity in a given scenario has proved a complex area that requires careful exploration.263

We may also recall that the Compact Principles are subject to a general rider requiring companies to take measures only within their sphere of influence.264 But what constitutes a corporation's "sphere of influence," though fundamental to the efficacy of Compact principles, is a matter of uncertainty and speculation. No guidance is given on whether it will include the subsidiary and affiliate concerns, or the supply chains of a parent corporation.265

This is not to say that the U.N. Compact Office has not made any efforts to infuse some certainty into these key concepts. Implementing the Global Compact: A Booklet for Inspiration, for example, explains three types of complicity - direct, beneficial and silent266 - which mirror those identified by Clapham and Jerbi.267 Companies are advised to "actively avoid all kinds of direct and indirect complicity."268 The Booklet also provides a self-evaluation test for complicity.269 A company in doubt should ascertain "the effect on violations if our company or other similar companies did not par- ticipate in the activity in question or did not work with the partner in question."270 Although the three types of complicity are defined quite broadly, the application of the suggested test may produce narrow results. Let us hypothetically apply the test to the controversial roles of Yahoo!, Microsoft, Google, and Cisco in Internet censorship in China. By applying the test, all four corporations could come to the conclusion that irrespective of their role there would be censorship and control over Internet use in China. So, they are not complicit in the instant Internet censorship. If the test brings such a result, then it is arguably not satisfactory.

3) Communication on Progress

The Global Compact initially required participating companies to submit an annual "net report" to show their commitment towards the Compact principles.271 In January 2003, this requirement was replaced with the submission of an annual Communication on Progress (COP).272 The COP is intended to both "ensure and deepen the commitment of Global Compact participants and to safeguard the integrity of the initiative."273 A failure to provide the COP will result in that corporation being listed on the Global Compact's website as a "non-communicating" participant, or "inactive" if the COP is not submitted for two consecutive years.274 Despite not being very onerous, about one-quarter of the total participants (mostly corporations) have defaulted on this requirement.275

Even if this attitude changes in the future and more corporations submit COPs, the efficacy of the requirement is in doubt. Sharing good corporate practices and other experiences might help to "drive out" bad practices.276 But in the absence of any proper and independent monitoring of companies' conduct, the whole exercise may often prove to be a mere ritual or public relations gimmick.277 Professor Prakash Sethi argues that "the Global Compact at best will be a good old boys club and at worst a support group in which like-minded corporations will share their experiences and encourage each other to do better next time."278 Moreover, companies might also pick up bad practices through learning forums, for example, how to spread the image of being a good corporate citizen while doing litde to earn the label.279

4) Lack of Verification and Independent Monitoring

It is a declared policy of the Global Compact not to provide for any penalty in situations where world business leaders ignore its "moral compass" by failing to embrace Compact principles.280 It is openly admitted that "the Global Compact is not a code of conduct; monitoring and verification of corporate practices do not fall within the mandate or the institutional capability of the United Nations."281 Dialogue with business is a central tool of the Global Compact in ensuring respect for its principles, but it is doubtful whether the means employed could achieve the intended ends of changing corporate behavior.282

External independent monitoring, as well as a robust and transparent system for evaluating corporations' conduct, is desirable.283 But it is likely that corporate executives will likely continue to resist any attempts directed at external monitoring or mandatory enforcement of the Compact principles.284 Special Advisor of the United Nations Secretary General for the U.N. Global Compact Klaus Leisinger lists another hurdle to institutionalizing independent verification as actually identifying who the "independent juror" would be.285 Corporations and other stakeholders might have divergent views on the independence, expertise and legitimacy of potential verifiers. To overcome this, Leisinger suggests that "several actors with different competencies and expertise" could collaborate to verify the extent to which human rights responsibilities have been met.286

5) Misappropriation of the Compact's Image

The Compact is also not adequately protected against a misappropriation of its image for profit. It may be technically correct to argue that the Global Compact does not "endorse companies that participate in this initiative."287 But it is equally true that the Compact does not stop participant corporations from projecting themselves as responsible corporate citizens on account of being Compact parties. In fact, there is an apprehension that some corporations might use the Global Compact as a "marketing tool,"288 to "bluewash" their reputation or image,289 or to gain undue sympathy from consumers, prospective shareholders, and employ- ees.290 BHP, for example - despite blatandy ignoring the mandate of "collective bargaining" - continues to represent on its website and in its various reports that BHP is committed to the Global Compact principles.291 BHP is not alone in being accused of bluewashing its image. It shares the dais with other well-known MNCs such as Bayer, Nike, Shell, Rio Tinto, and Nestle.292

One major reason why corporations can get away with misusing their association with the Global Compact is that the Compact Office "neither regulates nor monitors a company's submissions and initiatives."293 There is no effective mechanism to differentiate real, committed participants from namesake, uncommitted ones. Even the current logo policy and integrity measures do not adequately and squarely address this issue.294

C. Response and Attitude of U.S. Corporations toward the Compact

Despite the limitations pointed out above, the number of Global Compact participants has increased over the years: from thirtyeight in July 2000 to 263 in December 2001, 721 in December 2002, 1180 in December 2003, 2136 in December 2004, and 2735 in December 2005.295 As of September 18, 2006, there were 3811 participants, of which a great majority were corporations.296 Both the number of participants and the rate at which the participation is increasing look impressive.297 It should be noted, however, that the regional distribution of Compact participants is highly uneven (Chart 1). Over forty-six percent of the total participants are based in Europe alone, the Americas coming a distant second with about thirty percent of participants. Asia is the home of about sixteen percent of the Compact participants, while the shares of Africa (4.72 percent), the Middle East (1.78 percent) and Australasia (0.71 percent) are negligible.

Participation from the Americas looks quite healthy, especially as compared to the level of participation from Africa, the Middle East, and Australasia. But of this, the participation from North America, specifically the United States, is not that impressive, ranging between five to eight percent.298 The number of U.S. corporations that have adopted the Compact is quite dismal (only 160 as of September 18, 2006).299

1) U.S. Business Participants Versus Other Stakeholders

It is surprising that the Global Compact has not attracted many participants from the United States despite the fact that the Compact Office invested "substantial time during its first four years in attempting to bolster support among U.S. companies."300 Should the trend of low U.S. participation continue, it is likely to adversely affect the long-term success and legitimacy of the Compact. Why are the U.S. corporations not keen buyers of the Compact's responsible citizenship idea, say, as compared to their European counterparts?301 Although further research is needed to understand fully all the reasons behind this disparity,302 at least one major factor should be stated here. This reason was made explicit by Georg Kell, the Executive Head of the U.N. Global Compact Office, in an interview: "[T] he U.S. is a very litigious society. Therefore, the challenge of getting a CEO to sign on to principles is much greater than in any other culture."303 To be fair, the fear of U.S. corporations that their pledge to the Global Compact's principles might draw them into long court battles is neither totally unfounded nor without precedent.304 In order to overcome this corporate fear, a "litigation-proof letter - which the chief executive officer of a U.S. corporation could send to the Compact Office to join the Compact - has been drafted by the American Bar Association and vetted by 20,000 business lawyers.305

A close perusal of the letter indicates how it further dilutes what is expected from the Global Compact participants. First, the letter substitutes the concept of "sphere of influence"306 with the following: "We express our intent to support and advance those [ten] principles within our company and entities controlled by it."(TM)7 Second, the letter reiterates that the "Global Compact is not a grading or enforcement mechanism."308 Third, it contains the following wide caveat on behalf of the prospective participant: "[0]ur participation in the Global Compact does not limit our freedom as permitted by law to oppose public or private sector activities which we do not believe are in the interests of our company."309 Fourth, the letter puts on record that "the Global Compact may be implemented differently in different countries, in keeping with local laws and customs."310 The influence of this "magic" letter on inducing more U.S. corporations to join the Compact has yet to be seen.

The more revealing finding of present research is that, as compared to U.S. business participants (corporations), other U.S. stakeholders (i.e., NGOs and academic institutions) have shown more willingness to embrace the Global Compact. As of September 4, 2006, there were 158 Compact participants from the United States.311 Of these, 101 (63.92 percent) were business participants and fifty-seven (36.08 percent) were other stakeholder participants. The low percentage of business participants from the U.S. is well below the global average at eighty-two percent.312 A survey of ten countries selected from all the continents also confirms that the relatively low U.S. business participation is more the exception than the rule (Chart 2). While U.S. businesses make-up about sixty-four percent of total national participants, business participants from other countries range from seventy-two percent (Australia) to almost ninety-six percent (Japan) . On the basis of these findings, it is safe to conclude that, as compared to non-U. S. corporations, the U.S. corporations are less keen on adopting the Global Compact. This conclusion is further supported by a recent survey conducted by Professor John Ruggie.313 Ruggie's report notes: "North-American firms are slightly less likely than Europeans to have adopted human rights policies or practices, even though proportionally they were somewhat more likely to have experienced a significant human rights issue."314

It is, however, possible to interpret the above data as establishing that "other stakeholders" in the United States are more willing to embrace the Compact as compared to their counterparts in other countries. Chart 3 shows a sector-wide distribution of Global Compact participants from the United States. Apart from companies (36.08 percent) and small or medium-sized enterprises (27.85 percent), NGOs (20.25 percent), academic institutions (7.59 percent), and business associations (6.33 percent) are other major U.S. participants.315 Although further research may be needed, it appears that other stakeholders' decisions to join the Global Compact are unaffected by the litigious nature of U.S. society or the absence of a "litigation-proof letter. This is most likely because these other U.S. stakeholders have nothing to fear. Only those participants not willing to adhere to and implement the Compact's principles, both in their letter and spirit, would likely face litigation. Thus, one can infer that other U.S. stakeholders seem to take the Compact far more seriously than U.S. business participants.

Moving from general to specific influence of the Global Compact on Yahoo!, Microsoft, Google, and Cisco, it is worth noting that to date only Cisco, and just recently Microsoft, have signed on to the Compact. No doubt the membership of the Global Compact is not the sole litmus test to judge good corporate citizens. All the Compact participants do not ipso facto become good corporate citizens,316 and conversely, non-participants can effectively fulfill their social responsibilities through other means. Nevertheless, the fact that many U.S. corporations - including Yahoo! and Google-have not been inclined to join the Global Compact should be a matter of concern for the Compact Office.

2) A Quick Look at Corporations in the Financial Times Global 500

It is also worthwhile to consider how seriously the largest corporations have responded to the challenge of embracing the Global Compact.317 The Compact Office takes pride in the fact that a substantial percentage of powerful corporations have joined the Global Compact.318 Over 100 of the Financial Times (FT) Global 500 companies are members.319 To no surprise, the United States tops the list of countries with FT Global 500 companies with a whopping 219; Japan comes in a distant second with a mere fortythree companies.320 But of these 219 U.S. corporations, only nine (4.10 percent of the total) have bought into the Compact's idea of good corporate citizenship.321 This again indicates that, as compared to the largest corporations in other countries, U.S. corporations have not been receptive to the Global Compact.322

Some credit, however, does need to be given to the hundredplus FT Global 500 companies that have adopted the Global Compact. Only one of these corporations (Johnson Controls, Inc.) has been listed as "non-communicating" by the Compact Office.323 This level of participation implies that if larger corporations decide to join, they seemingly take their responsibilities more seriously. It is perhaps more than a coincidence that this sole defaulter is from the United States.

3) How Serious Are Those U.S. Corporations that Have Embraced the Compact?

The Compact website lists a participant as "non-communicating" if it "failed to develop a Communication on Progress by the relevant deadline or has not yet provided a link to/description of their Communication on Progress."324 Apparently, development of a COP is the absolute minimum one can expect from a serious participant. Thus, a participant who fails to develop even a COP cannot be considered as seriously embracing the Compact's principles.325 Many Compact participants from the United States have failed to fulfill even this bare minimum. On September 4, 2006, thirty-four of the total 158 U.S. participants (21.51 percent) were listed as non-communicating.326 The striking feature is that all of these thirty-four non-communicating participants are from the business sector: Nineteen companies and fifteen small or medium-sized enterprises. In other words, U.S. NGOs, academic institutions and business associations (other stakeholders) that have joined the Global Compact have complied with the threshold COP requirement.

Although the level of non-seriousness shown by the U.S. participants towards the Global Compact is unacceptably high, it is still below the global average of non-communicating participants (24.72 percent). Given that almost one-quarter of the Compact's total participants are non-communicating, it is safe to conclude that many participants (most likely corporations) have become party to the Global Compact either without realizing what it entails, or are consciously embracing the Compact only as a public relations exercise.

In a specific example, Cisco, which joined the Global Compact on September 6, 2001, has not fulfilled its responsibilities as a Compact participant.327 Moreover, the weblink to its COP that Cisco provides on the Compact's website contains a lot of noble policy statements, but still describes the Global Compact having only nine principles.328 This is a minor (some even might say technical) aspect, but in my view it underscores the lack of seriousness shown by Cisco towards the Compact principles.

IV. THE GLOBAL ONLINE FREEDOM ACT AND CORPORATE COMPLICITY IN INTERNET CENSORSHIP: COULD IT ENSURE FREEDOM?

The most direct and recent legislative response to the complicity of U.S. corporations in Internet censorship in China is the U.S. Freedom Act. Congressman Christopher Smith, a Republican, introduced the Freedom Act in the House of Representatives on February 16, 2006.329 Since then the Act has been referred to various committees and subcommittees - such as the Committee on International Relations and the Subcommittee on Africa, Global Human Rights and International Operations - to consider provisions that fall within their respective jurisdictions.330 The most recent Congressional action was taken on June 22, 2006, when the Subcommittee on Africa, Global Human Rights and International Operations forwarded the Act to the full International Relations Committee.331

The Freedom Act, which is an example of home-state extraterritorial regulation,332 has a long list of successful, as well as unsuccessful, predecessors333 in both the United States and abroad.334 Previous laws, for example, were enacted to deal with the involvement of U.S. corporations in corrupt practices,335 apartheid,336 and the Arab boycott against Israel.337 One could also see in this context the invocation of the Alien Tort Claims Act to make U.S. corporations accountable for human rights abuses committed by them or their subsidiaries abroad.338 Also, not long ago, the Corporate Code of Conduct Act 2000 - which would have required U.S. corporations employing more than twenty persons in a foreign country to implement a code of conduct with respect to the employment of those persons - was introduced but never passed.339

Though the United States has been at the forefront of enacting extraterritorial laws,340 the Freedom Act arguably falls in a distinct and less controversial category than, say, antitrust laws.341 The Act is less controversial because it seeks to promote an important inter- national policy.342 I have argued elsewhere that it is legitimate and justified for a state, via application of extraterritorial laws, to enforce internationally recognized human rights obligations on the overseas activities of national corporations and their subsidiaries.343 The Freedom Act, as Professor August Reinisch would argue, is part of a "new wave" of extraterritoriality and "can be viewed as a form of decentralized enforcement of international law."344 This Part discusses the Freedom Act and how the Act proposes to achieve its objectives, and then analyzes whether the Freedom Act could be a more successful regulatory mechanism than the Global Compact.

A. What the Act Seeks to Do and How

The Freedom Act seeks to "promote freedom of expression on the Internet, to protect United States businesses from coercion to participate in repression by authoritarian foreign governments, and for other purposes."345 The Act embodies a three-prong U.S. policy: (a) to promote the ability or right of all to receive and impart information and ideas "as a fundamental component of United States foreign policy"; (b) to use all instruments within the United States' influence to support, promote, and strengthen the free flow of information; and (c) to prohibit any U.S. businesses from cooperating with officials of Internet-restricting countries in affecting political censorship.346 Any U.S. business which "empowers or assists an authoritarian foreign government" in Internet censorship will be "working contrary to the foreign policy interests" of the United States.347 The term "United States business" refers to any corporation or partnership that has its principal place of business in the United States, or is organized under U.S. laws.348 This includes any foreign subsidiary of such entities.349

The Act proposes several means in order to achieve its objectives. Apart from encouraging the U.S. President to commence negotiations with other countries to develop an international agreement protecting Internet freedom,350 it provides that annual country reports on human rights practices-under the Foreign Assistance Act of 1961(351)-"shall include an assessment of the freedom of electronic information in each foreign country."352 The Act also proposes to establish the Office of Global Internet Freedom in the Department of State.353 This Office shall, inter alia, serve as a focal point to protect and promote freedom abroad, develop and implement a global strategy to combat state-sponsored Internet censorship, and work with various stakeholders "to develop a voluntary code of minimum corporate standards related to Internet freedom."354

Under the Freedom Act, the U.S. President can designate a country as Internet-restricting if "the government of the country is direcdy or indirectly responsible for a systematic pattern of substantial restrictions on Internet freedom during the preceding oneyear period."355 Although such a designation is to be done by the President annually, the Freedom Act lists certain countries, such as China, Iran, North Korea, Burma, Tunisia and Vietnam, that are to be regarded as Internet-restricting countries.356

The most important parts of the Freedom Act are those provisions which impose obligations on U.S. corporations and their overseas subsidiaries. First, the Act prohibits any U.S. business that provides or hosts any Internet search engine from locating within an Internet-restricting country any computer hardware which is used to house, store, serve, or maintain files or other data involved in providing such search engine.357 The search engine providers are also not permitted to alter search results at the request of Internet-restricting countries.358 Second, U.S.-based search engine providers are also obligated to provide to the Office of Global Internet Freedom a list of all terms submitted to them by Internet-restricting countries to filter search results.359

Third, the Act further provides that any U.S. business that maintains an Internet content hosting service shall not conduct Internet jamming of a U.S.-supported website in an Internet-restricting country.360 Fourth, U.S. corporations that maintain an Internet content hosting service shall provide the Office of Global Internet Freedom with copies of all data and content that it has blocked or removed at the request of an Internet-restricting country.361

Finally, any U.S. business that maintains an Internet content hosting service shall not provide to an Internet-restricting country information that personally identifies a particular user of such content hosting service, "except for legitimate foreign law enforcement purposes as determined by the Department of Justice."362 Any person, irrespective of her citizenship status, who feels aggrieved by a violation of this provision may approach an appropriate U.S. district court to seek damages or other suitable relief.363 The Freedom Act, thus, affords a civil remedy to U.S. and non-U.S. citizens alike for what can be considered a breach of the right to privacy by U.S. corporations.

From this brief review one can see that the proposed law seeks to address situations like the role Yahoo!, Microsoft, and Google played (and are playing) in Internet censorship, specifically, the censoring of search results and web content, disclosing information about e-mail account holders, and the blocking of websites. The Act also attempts to overcome the problem of hardware supply by corporations like Cisco by establishing export control and license regulations.364 The proposed regulations apply to any person within the U.S. jurisdiction who may knowingly export any item "to an end user in an Internet-restricting country for the purpose, in whole or in part, of facilitating Internet censorship."365

The Freedom Act provides both civil and criminal penalties if any U.S. business or person violates its provisions.366 Section 206(a)-barring the disclosure of personal identification information of users-is considered most serious in imposing a fine of up to $2,000,000, and an imprisonment of up to five years if the provision is willfully violated or attempted to be violated.367 The violation of other provisions, on the other hand, impose a civil penalty of not more than $10,000, and imprisonment of up to one year for willful violation.368 The Act also seeks to encourage personal responsibility by imposing a fine on any officer, director, employee, etc., of a U.S. business, and requires that the fine not be paid by the business.369

B. Could the Act Succeed where the Global Compact Failed to Deliver?

The Freedom Act, to date, has received a mixed response from different stakeholders.370 All four MNCs that appeared at the U.S. House of Representatives Joint Hearing asked for the intervention of the U.S. government, though indicating-both directly and indirectly-their non-preference for legislation similar to the Freedom Act.371 Even Reporters Without Borders proposed that "a law regulating the activities of Internet companies should only be drafted as a last resort" and that, first, an attempt should be made by Congress to encourage corporations to agree on a code of conduct.372 Human Rights Watch, on the other hand, "believes that barring a dramatic change of behavior by Internet companies doing business in China, legislation will be necessary."373

As the time of this publication, the Freedom Act, or any similar law, had not passed the U.S. Congress.374 If we look at history and the involved actors, however, it seems unlikely that the Act will ever be enacted as law. The first and most critical reason is that enactment of such extraterritorial measures requires a strong political will, which is bound to vary from issue to issue. As an illustration, under the current political climate, the current U.S. administration would be more keen to enact an extraterritorial law in the interest of national security or foreign policy goals than to overcome Internet censorship in China.375 Second, although the U.S. government is a self-appointed international guardian of human rights, it is more willing to act extraterritorially to protect the freedom of its own citizens than the freedoms of foreigners. Professors Mark Gibney and R. David Emerick conclude that "the law has been applied extraterritorially when it seeks to prevent negative phenomena from occurring in the United States, but generally not when an agent of the United States (or the government itself) pursues activities that might bring about 'negative effects' in other countries."376 Third, as the proposed law seeks to regulate the conduct of powerful actors-Yahoo!, Microsoft, Google, and Cisco, as well as China-the political force against passage will be strong. Each of these factors makes enactment unlikely.

Assuming for the sake of argument, however, that the Freedom Act were to be enacted as law, it is still unlikely to achieve its objectives in its current form. There are several problematic aspects to the Act. First, the Freedom Act aims to protect and promote Internet freedom as part of U.S. foreign policy rather than international policy. Realization of human rights is part of a collective international policy, and any extraterritorial law could be better rationalized on this ground. Any reference in a future version of the Freedom Act to merely promoting U.S. foreign policy should be avoided because it will invite legitimate apprehensions over any U.S. hidden agenda, or arguments of moral ascendancy.

Second, some provisions of the Freedom Act are simply impractical, unworkable, or overly ambitious. The U.S. President has been empowered to designate annually "Internet-restricting countries."377 Although this concept is central to the success of the Act, there is a possibility that this power could be misused for political gains. Whereas States friendly with the U.S. administration may escape such designation, some other States might be classified as Internet-restricting countries just because they are not on good terms with the administration. Similarly, it will be difficult for the U.S. Department of Justice to define the "legitimate foreign law enforcement purposes" under which disclosure of personal information about certain Internet users would be lawful.378 The Act makes it an offense for any U.S. business that maintains an Internet content hosting service to conduct Internet jamming of a U.S.-supported website or U.S.-supported content in an Internet-restricting country.379 But this is overbroad and would create problems, for example, if an Internet-restricting country insists on blocking some U.S. pornographic websites.

Fourth, the Act might also encounter operational difficulties in promoting freedoms globally. The contours of the rights to freedom of speech and expression are not the same everywhere. The desecration of the national flag, for example, is acceptable in the United States as an expression of one's freedom of speech,380 but this is a criminal offense in many countries.381

Finally, the Freedom Act does little, beyond assigning a limited role in the drafting of a code of conduct, to recognize civil society's role in achieving global Internet freedom. In view of inherent limitations of the court-based approach to extraterritorial enforcement of human rights standards,382 the Act should have explored the possibility of "social enforcement" of human rights.383 The Act, however, did not charter any useful course for NGOs or other bodies.

The Freedom Act, as it stood in the 109th U.S. Congress, suffered from several infirmities that need be rectified before any future version becomes law. This is not to say, however, that the introduction of the Freedom Act did not serve any useful purpose. Several provisions, such as the prohibition on locating servers and control measures in, and exporting hardware to authoritarian states, are steps in the right direction. In addition, the Freedom Act also contributed to debate on an important issue, sending a signal that new rules may be introduced to the game if corporations do not behave in socially responsible ways.

IV. CONCLUSION

The importance of the right to receive, impart, disseminate and exchange information hardly needs to be emphasized. The rise of information technology is shaping the contours of this right in previously unimaginative ways. Corporations have played the central role in this information revolution. But this development has not been free from difficulties-the digital divide, cyber crimes, and censorship-and corporations have contributed to these difficulties, as well. This Article has focused on one such difficulty: Internet censorship in China. While the Internet is generally regarded as an empowering medium, it also enables some entities to exercise control over who is going to get what information, when, and at what price. But it is when states and corporations act in concert to exercise this control that the checks and balances over the flow of information are lost. The involvement of Yahoo!, Microsoft, Google, and Cisco in Internet censorship in China illustrates how a "public-private cartel" for Internet censorship can not only curtail the right to information or the freedom of speech and expression, but also abridge other important human rights.

In this Article I have shown how four U.S. corporations have facilitated, to a varying degree, Internet censorship by the Chinese government in total disregard for its human rights obligations under both the Chinese Constitution and international human rights law. Yahoo!, Microsoft, Google, and Cisco have assisted in Internet censorship by self-censoring search results, blocking blogs or websites, selling censorship-enabling hardware, and disclosing personal information about Internet users. In doing so, these four MNCs acted in breach of their human rights responsibilities under the Global Compact and U.N. Human Rights Norms. Instead of cooperating with the Chinese authorities, Yahoo!, Microsoft, Google, and Cisco could have adopted a range of options short of total withdrawal from the market. But these corporations preferred to opt for an easier and more profitable, but less ethical option. The four MNCs also advanced multiple arguments to justify their operations in, and complicity with, an oppressive state. A critique of these justifications reveals that they all should be rejected.

The efficacy of existing regulatory initiatives in redressing corporate complicity in human rights abuses is also suspect. Both the Global Compact (an existing initiative) and the Freedom Act (a proposed initiative) lack the effectiveness to ensure that corporate actors do not abridge human rights. The Global Compact suffers from serious limitations which direcdy impair its efficacy in promoting responsible corporate citizenship. Available data shows that, as compared to non-U.S. corporations, U.S. corporations generally are less interested in embracing and implementing the Compact. In particular, the Global Compact's principles apparendy have had no visible or significant impact on how Yahoo!, Microsoft, Google, or Cisco continue to do business in China. The failure of the Global Compact to take on board even a minimal number of U.S. corporations is a serious limitation for its success. The regulation envisioned by the Freedom Act does not offer much hope either. First, when discussed in the context of U.S. history regarding extraterritorial laws, the Freedom Act seems unlikely to pass through the Congress. But even it is enacted as law, it is doubtful the Act could achieve its noble objective in the current form.

One should not, however, lose heart in the fact that no existing initiative is able to afford robust protection against corporate human rights abuses. It took several decades to put in place statefocal human rights regimes at both the international and national levels, and the system is still far from perfect. The task of subjecting corporations to human rights norms is even more complex and challenging, given their sheer number, power, and influence. This project also challenges several well established principles of corporate and other laws, and would require a reorientation in the place and role of corporations in society. The need of the hour is to continue engagement with various stakeholders on how to move towards chartering a definite role for corporations in human rights realization. Among others, this is likely to require employment of creative, unconventional approaches and an "integrated theory" of corporate regulation384 so as to offer any real hope of justice to the victims of corporate human rights abuses. The era of legally binding corporate human rights obligations has not even properly begun.

SURYA DEVA*

* Lecturer, School of Law, City University of Hong Kong. Formerly Assistant Professor, National Law Institute University, Bhopal; Lecturer, Faculty of Law, University of Delhi. LL.M., LL.B. University of Delhi; Ph.D. Thesis submitted, Faculty of Law, University of Sydney. I would like to thank Katherine KK Ng for providing research assistance. I dedicate this article to all those who suffered or are suffering due to corporate complicity in Internet censorship in China or elsewhere.

Copyright George Washington University, National Law Center 2007
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