Corporations, Climate, and the Court

Corporations, especially those engaged in fossil fuel production, agriculture, construction, and transportation, play a significant role in the climate crisis and in its human rights impacts. Holding businesses responsible for their human rights and environmental harms has been a perennial challenge that has become increasingly acute in the climate crisis. While human rights law conceptualizes States as primary duty bearers, many multinational corporations (MNCs) hold power and resources to rival small States. Many of these transnational enterprises have long manipulated jurisdictional loopholes and weaponized international trade and investment law to evade accountability. Some have even sought to penalize States that try to improve human rights and environmental standards in ways that conflict with corporate interests. It is thus of critical importance that the Inter-American Court of Human Rights (IACtHR)’s Advisory Opinion 32/25 (AO-32/25) not only directly addresses corporate climate and human rights impacts, but also provides some pathways forward on these persistent barriers to accountability. This blog discusses AO-32/25’s holdings and innovations as related to business and human rights and reflects on their broader legal implications.

A Call to States to Strengthen Domestic Legal Frameworks

Because States are indeed the primary duty bearers under human rights law, AO-32/25’s roadmap for addressing corporate conduct that damages the global climate system hinges primarily on holding States accountable for failing to adequately regulate and oversee third-party actors. The opinion outlines detailed requirements for States to “adopt legislative and other measures to prevent human rights violations committed by public and private enterprises” (para. 345). While these provisions don’t address corporations directly, they have serious implications for them. The AO requires binding domestic instruments to advance corporate due diligence and transparency and to combat corporate greenwashing.

Requiring Due Diligence 

Not only does AO-32/25 mandate States to pass legislation codifying corporate human rights and climate due diligence requirements, it also provides detailed guidance on what that due diligence should look like (para. 348). Due diligence processes must: (1) apply throughout companies’ supply chains; (2) be subject to continuous monitoring; (3) ensure public access to information; and (4) guarantee adequate pathways for public participation and accountability. In this respect, AO-32/25 builds on momentum from the European Union’s Corporate Sustainability Due Diligence Directive and recent Due Diligence laws in several European Union countries. Thus, for multinational corporations (MNCs), due diligence is no longer a mere quirk of operating in the European Union: it is a multijurisdictional legal requirement.

Mandating Transparency 

AO-32/25 requires States to obligate companies to make public certain information in their possession, including on: (1) greenhouse gas (GHG) emissions in their supply chains; and (2) the implementation of due diligence (para. 349). Here, the IACtHR builds on the Regional Agreement on Access to Information, Public Participation and Justice in Environmental Matters in Latin America and the Caribbean (Escazú Agreement), which requires States to “promote access to environmental information in the possession of private entities” (Art. 12). Given that oil and gas companies knew more about climate impacts than State actors for decades and not only failed to make this information public, but actively sowed disinformation, these transparency requirements are essential.

Combatting Greenwashing and Corporate Influence

Corporate actors also contribute to the climate crisis and related human rights harms by seeking to mask the damage they cause through greenwashing: performative environmental action or rhetoric. AO-32/25 requires States to adopt norms to combat greenwashing and corporate influence in climate policy and regulation (para. 347). These specific provisions regarding the regulation of corporate behavior are complemented by AO-32/25’s robust call for states to combat disinformation on the climate crisis (paras. 524-529).

Centering Procedural Rights

Human rights protection in the context of development projects often hinges on the mechanics of public participation, consultation, and consent. AO-32/25’s focused attention on procedural and participation rights (paras. 458-587) therefore has critical implications for corporate accountability. Adopting the logic of its judgment in Case of the Inhabitants of La Oroya v. Peru, the IACtHR emphasizes that when measures adopted by either States or private actors may “affect the rights of a specific group,” it is “imperative that such group be afforded an effective opportunity to be heard and to participate in decision-making.” (paras. 537-538). AO 32/235 clarifies that authorities must, inter alia: (1) be guided by “consensus and decisions reached through participatory processes” (para. 538); (2) explain how they considered public input (para. 538); (3) actively promote the participation of Indigenous, Afro-descendent, peasant farming, and fishing communities (para. 539); and guarantee participation not only at the start of the project, but throughout project monitoring and due diligence procedures (para. 349).

Buttressing a Regulatory Approach: Multijurisdictional Regulation and HRD Protection

While a framework grounded in a continued focus on States as duty bearers cannot fully escape the Realpolitik of MNCs as quasi-States, AO-32/25’s emphasis on State obligations to regulate both the companies that are domiciled in their territory and those that operate within them (para. 347) is a promising step forwards. This provision explicitly opens multiple frontiers to regulate the behavior of MNCs operating in the Americas. For example, in the case of a Canadian mining company with extractive projects in Peru and Bolivia, all three countries–Canada, Peru, and Bolivia–have a duty to regulate. The failure of countries in the Global North where MNCs are often domiciled to adequately regulate their activities has been a major loophole exploited by corporate actors, allowing them to create judgment-proof subsidiaries abroad and evade jurisdiction at home. The provision also has important implications for countries like Panama and the Cayman Islands, which have traditionally tried to incentivize corporations to domicile with the promise of low financial transparency; AO-32/25’s regional reach means even these “secrecy jurisdictions” will be required to improve key transparency metrics.

AO-32/25 also requires that States  take measures to support the actions of human rights defenders (HRDs) with regard to corporate actors (para. 347)  which is also an essential complement to its focus on regulation. It is well documented that land, environmental, and climate defenders are most likely to be attacked when their advocacy intersects with “large business projects.” Increased regulation can only be effective when civil society and communities can safely denounce regulatory violation. Here too, AO-32/25 echoes the Escazú Agreement, weaving together transparency, regulation, and protection for HRDs. A dedicated section of the opinion (paras. 561-587) details recommendations regarding the “special duty of protection” (para. 566) of HRDs, which “imposes on the authorities an enhanced obligation to devise and implement appropriate public policy instruments, and to adopt the pertinent domestic legal provisions and practices to ensure the free and safe exercise of the activities of human rights defenders” (para. 562). The IACtHR’s reiteration of State obligations to support HRDs in the section addressing corporate actors is appropriate given the intimate link between corporate exploitation and corruption and killings, disappearances, criminalization, and harassment of HRDs.

Introducing Differentiated Corporate Obligations

In line with the IACtHR’s existing jurisprudence, as well as the Inter-American Standards on Business and Human Rights, AO-32/25 reiterates that businesses themselves have “obligations and responsibilities” regarding the climate crisis (para. 346). The IACtHR states, “business enterprises should prevent their activities from causing or contributing to human rights violations, and must take measures to remedy any such violations” (para. 345). In addition to emphasizing the duty of States to establish adequate legal frameworks to constrain corporate behavior (as explored above), the IACtHR also proposes an innovative approach to corporate accountability: applying the principle of common but differentiated responsibilities and respective capabilities (CBDR-RC) to corporate actors.

A foundational principle of international environmental law, CBDR-RC was established in the United Nations Framework Convention on Climate Change (UNFCCC). Article 3(1) of the UNFCCC was designed to recognize States’ varying levels of historic responsibility for GHG emissions and varying capacity to address climate change impacts. Despite its foundational character and frequent invocation, there have been a number of recent challenges regarding the principle’s effectiveness and implementation. Developing countries charge that historically high emitters are shirking their mitigation and finance responsibilities, while developed countries argue that developing countries should start bearing more of the burden of climate action.

The IACtHR, however, may breathe new life into the CBDR-RC principle by extending it to corporations (para. 350). According to the IACtHR, “[i]n the context of the climate emergency . . . while all companies can contribute to meeting mitigation targets, some of them have a greater responsibility because of the risk created by the activities they carry out.” The IACtHR holds that “States should establish differentiated climate action obligations based on the current and historical contribution of companies to climate change and impose stricter duties on companies that engage in activities that generate higher GHG emissions.” This holding reaffirms the conclusion already reached by the Philippines Human Rights Commission, that there is a human rights basis for holding the Carbon Majors accountable for their outsized contribution to climate change, and recognizes that a one-size-fits-all approach to corporate climate accountability is unlikely to be effective or just.

Setting Up a Showdown with Investment Law

AO-32/25 directly wades into a long-boiling international law conflict between human rights law and environmental law, on the one hand, and investment and trade law, on the other. Free trade agreements (FTAs) and Bilateral Investment Treaties (BITs) frequently allow corporations to sue national governments in the Investor-State Dispute Settlement (ISDS) system, where only investors have rights. Investors can seek massive payments based on “indirect expropriation”: claims that national laws or policies negatively impact their investments, “legitimate expectations”, and future profits. As of 2023, countries in the Americas had faced 401 such suits and either “been ordered or agreed to pay investors 29.2 billion in awards and settlements.” Such proceedings are overwhelmingly brought by investors based in the Global North (U.S. investors alone account for 17.7% of complaints filed in ICSID) and disproportionately impact States—and their citizens—in the Global South. Proceedings often focus narrowly on States’ obligations under specific trade and investment law provisions, without any consideration for States’ competing legal obligations under international environmental and human rights law, including commitments made pursuant to the Paris Agreement.

The ISDS system is frequently weaponized by the mining, gas, and oil industries. In numerous cases, ISDS provisions have been used to challenge climate-protective regulations, including measures aimed at phasing out fossil fuels. As the damages awarded to companies in these cases can total in the billions, the potential for litigation exerts a chilling influence on governments considering regulations to better protect people and the environment. The IACtHR recognizes the risk of this “regulatory chilling effect” (paras. 163-164) and tackles the challenge that ISDS poses to effective climate action head-on: “States should revise their trade and investment agreements, as well as Investor-State Dispute Systems, to guarantee that they neither limit nor restrict efforts in the area of climate change and human rights” (para. 351).  

The IACtHR’s pronouncement that taking actions “to stop anthropogenic behaviours that critically threaten the balance of our planetary ecosystems” is a jus cogens obligation (para. 291) may bolster States’ ability to defend their climate policies within the ISDS system. The jus cogens designation is reserved for “peremptory norms of international law” that “are universally applicable and are hierarchically superior to other rules of international law.” While the IACtHR’s jus cogens analysis does not specifically address corporate action, the holding nonetheless provides significant support for State action to regulate corporate climate harms. By clarifying this international legal obligation explicitly, AO-32/25 strengthens States’ legal basis for defending against investor claims that climate-protective policy actions negatively affect their interests. States in the Americas can point to the AO to argue that their obligation to undertake climate action is “hierarchically superior” to their obligations under international trade and investment law.

Addressing the inequities and injustices of ISDS is essential to ensuring that effective climate action can proceed in the Americas. The fact that AO-32/25 directly addresses this point, coupled with its clarification of the jus cogens status of certain climate obligations, offers important tools. Critically, these provisions may influence more States to join the trend of renouncing ISDS in treaties. For as long as States continue to participate in the system, the efficacy of AO-32/25’s provisions may hinge in large part on arbitration tribunals themselves. Governed by discretion and “subject neither to precedent nor any meaningful appeal,” arbitration panels have long ignored international human rights and environmental law with little recourse. However, States can create pressure within the system by adopting key provisions from AO-32/25 as part of their legal defense. International law practitioners and scholars can aid in this effort through increased efforts to utilize the amicus curiae mechanisms in trade tribunals to highlight the implications of such cases for States’ international human rights and environmental obligations. While arbitration panels also have discretion to accept or reject amicus interventions, such broadened and heightened effort may convey that the system is not operating in the shadows and push tribunals to take into account the totality of international law and States’ overlapping legal obligations.

Conclusion

As firmly established by the IACtHR, “the adverse effects of climate change are, and will increasingly become, pervasive across all aspects of human life worldwide. These adverse effects constitute threats to and violations of human rights” (para. 118). As significant contributors to these adverse effects, corporations, especially large corporations in GHG emissions-intensive industries, bear significant responsibility for human rights harms associated with climate change. They must be held accountable for their role, and contribute to efforts to mitigate climate-related harms. AO-32/25 provides important new tools for those who seek to ensure corporate climate accountability and enable meaningful corporate climate action.