What is a multinational? BBC Learning English

Multinational corporations

– from the clothes we wear, to the technology we use,

they influence and control our lives

in ways we possibly don't even understand.

We'll show you how the law shapes their behaviour to keep us safe.

In this first episode... they're bigger than many countries,

but what exactly is a multinational corporation?

With huge resources and growing power, what keeps them in line?

And... is the law keeping up as these companies change themselves

and the world around us?

Multinational corporations –

private companies which operate in many nations –

can be richer than some countries...

and they're getting richer.

Food and drinks maker Nestlé, famous for Kit Kats and Cheerios,

was worth around 350 billion dollars in 2020.

That's more than the economic output of Portugal.

Oil company Shell is worth 87 billion dollars –

more than the Democratic Republic of Congo.

And Apple, whose products you might be using now, is worth two trillion dollars.

That puts its wealth ahead of both Russia and Canada!

How have companies got so big recently?

Well, in part the growth of the internet means that a company

can be based in one place, but sell around the world.

And that means it can grow and become very powerful.

Another aspect is China: it has opened up in recent decades

and so has been able to attract investment from around the world,

helping these companies to grow bigger.

The world is changing. These powerful international organisations

can know what we buy, who our friends are

and virtually everything else about us.

Questions have already been raised about how they're using this power.

If they chose to abuse that power and even break the law,

what would stop them? We spoke to lawyer Mark Stephens

and asked how the law is changing as multinationals get bigger.

The law's had to adapt and change from a nationally based system where,

you know, a company would only work in one country, where...

to the modern day, where companies will have multitudes of jurisdictions

that they operate in and therefore they need

some kind of almost global control

and that's where international law comes in,

because it sets the standards – the basic minimum standards –

that they have to comply with.

Mark thinks the law needs to develop

to set basic standards for multinational corporations.

Many laws were designed when companies were in just one country.

So, how effective is the law in dealing with multinationals?

I think the complexity of companies today, on an internationalised basis,

makes the law very difficult to be enforced against them.

So, I've got one client, which has 748 companies

in about 47 different countries,

and so getting an oversight of that, getting control of that

from a legal and regulatory side, can be very challenging.

And that's the opportunity that international law provides,

because essentially it's giving the minimum standards

to which they need to operate.

Companies are very complex

so sometimes it's hard to enforce the law

when they are spread out around the world.

Can we punish a parent company

for something it's responsible for in another country?

It's becoming easier to punish a... a mother company –

the holding company, if you will –

for the actions of its subsidiaries. But on the face of it,

it's the subsidiary that is going to be liable.

It's only if you can show that there was a controlling mind

back at the headquarters, or that in some way they should be accountable,

that you can hold the parent company to account.

Lawyers are becoming increasingly ingenious

in the way in which they are visiting accountability on the parent companies,

and that's only got to be a good thing because if they're accountable,

they will behave better.

It is becoming easier to punish companies

for wrongdoing in different countries,

and if they are accountable, it will influence their behaviour.

Of course, many companies do what's right without being forced to,

but it can take something shocking happening to start change.

In 2013, the Rana Plaza building in Bangladesh collapsed,

killing more than a thousand people.

It was the worst of many such incidents in the country.

The following month, international clothing manufacturers quickly

made a legal agreement to improve safety in factories in Bangladesh.

This is what's known as Corporate Social Responsibility or CSR.

These are the practices or policies that a business can implement

that do good in the world. Think charity, or volunteering,

or the environment and it's more than just about profit.

But what about when companies don't choose to behave?

How can the law control something that is so big?

Ranjan Agarwal, a Canadian lawyer who deals with big companies,

explained who is responsible for enforcing the law

on multinational companies.

In our system, around the world, we seem to have accepted that

the obligation or responsibility to police corporations

is with individual states.

In international law, there is no general rule

that companies are responsible for wrongful acts,

even if they're committed internationally or abroad.

There are treaties, multilateral treaties,

that impose requirements or obligations

on countries, but not on companies.

There is no international body that regulates multinationals.

Instead, there are treaties that impose obligations

on countries, but not companies.

So, do these companies have to follow things

like international human rights laws?

For the most part, no. In our system,

we require companies to follow the domestic laws of their states.

Those domestic laws may align with international human rights laws,

or human rights norms – expectations that we have as a community.

There are a couple of exceptions, where states...

where – sorry – companies may be governed by international treaties,

but those are generally exceptions.

Companies follow the domestic laws of their states,

but they don't necessarily have to follow international human rights laws,

which are designed for countries.

How do people decide which state's laws a company follows?

For the most part, people don't decide

where the law's going to be enforced.

We require our governments – sometimes working together –

to establish rules.

In essence, we have jurisdictional laws across the world:

each country gets to decide where and how

it's going to take jurisdiction over companies.

Sometimes it's where the company operates –

that is, where its headquarters is.

Sometimes it's where the company does business,

but again we rely on uni...

individual states to make those decisions.

Sometimes governments work together to establish rules,

but each country gets to decide where

and how it's going to take legal action over companies.

So, is international law fit for purpose as these companies develop?

I believe that international law is moving to a place where

companies may be held to account.

For example, several years ago the UN established guiding principles

on business and human rights,

which were intended to create a global standard,

to implement a framework to prevent and address

the risk of human rights on business activity.

But as long as we have nation states,

I believe that we will rely on individual countries to enforce these norms.

Even though the UN established principles

to guide businesses on human rights,

we rely on individual countries to enforce the law on companies.

So, we've heard that the way multinational corporations

are spread around the world makes them hard for the law to control.

We also heard that the law is changing to deal with that.

But international laws will always depend on countries

to agree to follow them.