Multinational corporations can be really big –
bigger even than some countries.
But does that mean they're more powerful than a country?
We'll show you how the law keeps things balanced.
How can countries stop multinational companies if they break the law?
And why do they end up fighting each other in court?
And... let's find out how companies structure themselves
to limit the power of a state.
They're used to getting away with it.
For decades, no one's held them to account.
They've never been subject to any serious pressure.
So, as these companies grow, is the law keeping up?
Do countries or companies have more power, legally?
Let's look at Canada, one of the most sued countries in the world.
Canada has been sued lots, because of something called
the North American Free Trade Agreement: NAFTA.
NAFTA was the free trade deal between Canada, the USA and Mexico.
But, it also made it easier for investors to sue governments
if they thought the deal was broken.
Canada soon became the most sued developed country in the world –
with 35 claims against it.
Foreign companies forced changes in Canadian law on toxic waste imports
and sued for millions of dollars over oil drilling regulations.
Campaigners were unhappy and it was eventually replaced
by the United States-Mexico-Canada agreement,
which limited the power of multinational companies
to take countries to court.
Maude Barlow campaigned against the trade agreement,
which she saw as deeply unfair.
She explained how she thinks companies got to be so powerful.
These corporations just expanded out
so that their production is in this country,
and their tax haven's in this country,
and their administration's here, and so on...
their head office might be somewhere else.
And so they truly are global corporations:
they really don't belong to nations... nation states.
And they want to influence law –
both nation-state law, but international law,
or lack of international law – so that they can do what they want.
Maude thinks some multinational companies use their size and spread
to influence and avoid the law.
She explained whether she thought laws
helped countries or companies more.
And here's the important thing: that what...
the kind of laws that corporations get, in free trade agreements,
give them legal right to sue governments
if they don't like their laws, if they can...
if they show that their laws can... are affecting their...
their right to profit – negatively affecting their right to make money.
Whereas there's nothing currently internationally, at the...
at the treaty level, at the UN level,
that really does impose restrictions on these corporations.
Maude says corporations can get rights from trade agreements,
but aren't limited as much by treaties.
She thinks companies have ended up with more power than countries.
She explained how:
That's the interesting thing: it's not that all the countries got together
and said, 'Let's give these corporations legal rights that we don't have.'
It happened piece by piece by piece.
It started with this North American Free Trade Agreement,
but since then there are more than 3,000 bilateral investment agreements
between countries – so, that's between any two countries and they...
then the corporation of this country can sue that government,
and the corporations of that country can sue that government.
Maude says companies have gradually gained power
through lots of trade agreements.
So, some strong opinions there from the campaigner, Maude Barlow.
States and multinationals often disagree.
Does the way the companies are made protect them from the law?
For instance, a company is based in the United States,
but it owns several 'subsidiary companies' in another country,
like China and Russia, that are registered in those countries.
This kind of structure means the main company is protected from being sued
because it's harder to sue a parent company
for the actions of a subsidiary in another country.
So, what does that actually mean in reality?
Daniel Leader has taken major companies to court.
He explains how hard it is to punish a parent company
for the actions of a subsidiary.
It is hard. We've had long legal battles
that have gone all the way to the Supreme Court,
where parent companies try to limit
the principle of parent company liability.
But, happily, the Supreme Court now has twice rejected
the company's attempt to narrow parent company liability,
and has in fact unanimously expanded the scope
of parent company liability,
and gone so far as to say if a parent company makes a public commitment
about supervising or assisting its subsidiary and it fails to do so,
that in itself can give rise to legal liability.
It is hard to punish a parent company, but some courts,
like the UK Supreme Court,
are doing more to hold parent companies responsible.
How effective is the law in dealing with companies that break the rules?
It's getting more effective. It's...
the fundamental problem is you've had corporate impunity for decades,
if not longer: corporations have not been held to account
for very serious human rights and environmental abuses.
But what's increasingly happening is the courts in many jurisdictions
are saying this is no longer acceptable and they are indicating that
they are willing to hold parent companies to account
for the harms that their subsidiaries have caused.
Daniel thinks for many years companies have avoided being punished
for very serious things, but that is changing.
So, how does a company use its structure to avoid legal responsibility?
Well, historically what they've done is
they've hidden behind what's called the 'corporate veil'.
They've said that the subsidiary is the one that's legally responsible
and the parent company should have no legal liability
at all for what happened.
But that is what we were unable...
we were able to unpick with the Supreme Court,
where the Supreme Court said, 'Absolutely not.
We are not going to allow corporations
to hide behind their structures,
if the parent company itself has been involved
in the harm that has been committed.'
Something called the 'corporate veil'
meant subsidiary companies were the only ones responsible
if they broke the law and were the only ones punished.
How is this actually changing?
Historically, companies have sat back:
they haven't really concerned themselves too much
about what the working conditions are in factories or in...
within their subsidiaries. They've just let it happen.
And they've certainly never felt that they could be held to account.
But what we are seeing is a real change in attitude:
you're getting more and more lawyers willing to take cases,
more and more organisations that are monitoring compliance.
He says where once companies felt they could do what they liked,
now more and more lawyers are willing to fight for your rights
against these big companies.
We've seen how multinational companies can try to use the law
to force countries to do what they want.
But this episode has also shown the power of the law –
and the determination of lawyers –
to make sure even these huge corporations follow the rules
that keep us all safe.