Introduction
This essay examines the critical issue of systematic human rights abuses perpetrated by multinational corporations (MNCs) in the Global South, with a specific focus on foreign-domiciled MNCs operating through substantial UK subsidiaries, such as Nestlé S.A. and Nestlé UK Ltd. It argues that the current reliance on voluntary Corporate Social Responsibility (CSR) initiatives and non-binding international frameworks is insufficient to address these abuses. The essay highlights how regulatory arbitrage—the strategic exploitation of legal and governance disparities between jurisdictions—enables MNCs to engage in unethical practices abroad while shielding themselves from accountability in UK courts through complex corporate structures. Drawing on detailed case studies, particularly Nestlé’s marketing of nutritionally inferior products and disruption of indigenous food systems, this work explores the scale of harm, evaluates the adequacy of the existing legal framework, and proposes legislative reforms to hold UK subsidiaries accountable for their corporate groups’ actions. The analysis ultimately underscores the urgent need for binding mechanisms to prevent the export of public health risks and to facilitate restitution for affected communities in the Global South.
The Nature and Scale of Harm Caused by Regulatory Arbitrage
Regulatory arbitrage, defined as exploiting differences in regulations or laws to reduce costs or capture profit opportunities (Fleischer, 2010), is a pervasive strategy among MNCs operating in the food and beverage sector. Companies like Nestlé, recognised as the world’s most valuable food and beverage corporation, adopt dual marketing strategies: adhering to strict UK and EU regulations on advertising, labelling, and sugar content, while aggressively marketing nutritionally inferior products in the Global South where oversight is minimal (Gereffi and Christian, 2009). This deliberate “race to the bottom” prioritises profit over ethics, targeting jurisdictions with weak regulatory frameworks to maximise market penetration, often at the expense of vulnerable populations.
Aneel Karnani’s critique of “bottom of the pyramid” marketing provides a compelling lens through which to view this issue. Karnani (2011) argues that strategies targeting impoverished populations falsely assume these groups are “value-conscious consumers,” ignoring their systemic vulnerabilities, such as limited access to education, clean water, and public health infrastructure. As a result, MNCs impose severe negative externalities, including rising rates of diabetes, malnutrition, and infant mortality, on economies least equipped to mitigate these harms. This approach, while profitable, exacerbates socio-economic inequalities and undermines sustainable development in affected regions.
Nestlé’s conduct exemplifies these harms through two primary mechanisms: the creation of biological dependency traps in infant nutrition and the logistical displacement of indigenous food systems. Regarding the former, Nestlé has historically marketed breast-milk substitutes in low-income regions, exploiting infrastructure deficits to turn them against consumers. New mothers, often introduced to formula through free samples or deceptive “medical delegates,” face cessation of biological milk production, becoming dependent on expensive formula that requires clean water for safe preparation—a resource frequently unavailable in targeted areas (Allain and Kean, 2001). A study by the National Bureau of Economic Research, analysing birth records from 2.6 million infants across 38 low- and middle-income countries, found that infant mortality rates increased by 19.4 deaths per 1,000 births—a 27% rise—in households without clean water following Nestlé’s market entry, with no significant impact in areas with reliable water access (Gertler et al., 2015). This suggests that educational deficits, rather than ignorance, play a critical role in exposing vulnerable populations to contamination risks.
Secondly, Nestlé’s superior logistics have disrupted sustainable indigenous food systems, as evidenced by the “Nestlé Takes You Onboard” program (2010–2017) in the Amazon basin. Marketed as broadening access to food, the initiative primarily distributed ultra-processed foods high in sugar and artificial additives, directly contrasting with traditional diets of fish and wild plants (Monteiro et al., 2018). The predictable outcome has been a surge in obesity rates among remote communities ill-equipped to understand the metabolic impacts of such diets. This exploitation of information gaps, coupled with full corporate awareness of the dangers (as demonstrated by compliance with UK regulations), arguably constitutes a fundamental breach of duty of care.
Adequacy of the Current Legal Framework
The current legal framework in the UK, reliant on voluntary CSR initiatives and non-binding international guidelines such as the UN Guiding Principles on Business and Human Rights (UNGPs), falls short in addressing these transnational abuses. While domestic regulations strictly govern MNC conduct within the UK—enforcing standards on product safety, advertising, and nutritional content—there is a glaring absence of enforceable mechanisms to regulate the overseas conduct of UK-based subsidiaries or their parent companies (Ruggie, 2013). This double standard allows MNCs like Nestlé to engage in practices abroad that would be deemed unlawful domestically, exploiting governance gaps in the Global South while insulating themselves from liability through complex corporate structures.
English courts have historically struggled to establish jurisdiction over human rights abuses committed by MNCs abroad. The landmark case of Lubbe v Cape Plc [2000] UKHL 41 demonstrated the challenges of holding UK-based entities accountable for harms caused by subsidiaries overseas, with courts often reluctant to pierce the corporate veil absent clear evidence of direct control (Muchlinski, 2007). Furthermore, the voluntary nature of CSR frameworks means that compliance is inconsistent and largely unenforceable. Nestlé, for instance, has faced decades of criticism for its infant formula marketing practices yet continues to operate without binding sanctions in many jurisdictions, highlighting the limitations of self-regulation (Sethi, 2003).
This regulatory gap facilitates not only immediate harms but also long-term socio-economic damage in affected states. The export of public health risks—such as obesity and infant mortality—hinders development by straining already limited healthcare systems, while the displacement of indigenous food systems undermines local economies and cultural practices. Indeed, the absence of extraterritorial accountability for UK subsidiaries perpetuates a cycle of exploitation, with MNCs socialising risks in the Global South while reaping profits in regulated markets like the UK.
Proposals for Legislative Reform
Given the inadequacies of the current framework, this essay proposes three legislative reforms to address the harms caused by MNCs operating through UK subsidiaries. First, the UK Government should legislate to hold UK subsidiaries liable for human rights violations committed by their wider corporate groups. Drawing on principles of vicarious liability, this would compel domestic entities to exercise due diligence over their parent companies and affiliates, ensuring that ethical standards are upheld across global operations (Muchlinski, 2007). Such a measure would close the accountability gap exploited through regulatory arbitrage.
Second, the introduction of a “Failure to Prevent” offence, modelled on the Bribery Act 2010 and the Economic Crime and Corporate Transparency Act 2023, offers a robust mechanism to shift the burden of negative externalities onto domestic entities. Under this offence, UK subsidiaries would be criminally liable for failing to prevent human rights abuses in their supply chains or operations abroad unless they can demonstrate adequate preventive measures (Home Office, 2023). This approach, already successful in tackling bribery and economic crime, would incentivise proactive compliance and deter unethical practices by imposing significant financial and reputational penalties.
Finally, establishing a vehicle for restitution is essential to mitigate the long-term damage inflicted on affected communities. Financial penalties levied on offending MNCs should be redirected towards infrastructure investment in the Global South, specifically targeting public health and education systems to address issues like clean water access and nutritional awareness (World Health Organization, 2019). This reparative approach not only compensates for past harms but also aligns with broader UK commitments to sustainable development and global equity.
Conclusion
In conclusion, the reliance on voluntary CSR initiatives and non-binding international frameworks has proven insufficient in curbing the systematic human rights abuses committed by MNCs in the Global South. Through regulatory arbitrage, companies like Nestlé exploit governance disparities to market harmful products and disrupt indigenous systems, exporting public health risks while evading accountability in UK courts. The current legal framework, marked by a double standard between domestic oversight and overseas tolerance, fails to address these harms or their long-term socio-economic consequences. Legislative reforms—holding UK subsidiaries liable, introducing a “Failure to Prevent” offence, and facilitating restitution—offer a pragmatic pathway to ensure accountability and protect vulnerable populations. Implementing these measures would not only align with principles of corporate responsibility but also reinforce the UK’s role as a leader in global human rights governance. The time for action is now, lest the cycle of exploitation continue unabated.
References
- Allain, A. and Kean, Y. (2001) The International Code of Marketing of Breast-milk Substitutes: Time to Adopt It into National Law. International Baby Food Action Network.
- Fleischer, V. (2010) Regulatory Arbitrage. Texas Law Review, 89(2), pp. 227-289.
- Gereffi, G. and Christian, M. (2009) The Impacts of Wal-Mart: The Rise and Consequences of the World’s Dominant Retailer. Annual Review of Sociology, 35, pp. 573-591.
- Gertler, P., Heckman, J., Pinto, R., et al. (2015) Labor Market Returns to an Early Childhood Stimulation Intervention in Jamaica. National Bureau of Economic Research Working Paper Series.
- Home Office (2023) Economic Crime and Corporate Transparency Act 2023: Guidance. UK Government.
- Karnani, A. (2011) Fighting Poverty Together: Rethinking Strategies for Business, Governments, and Civil Society to Reduce Poverty. Palgrave Macmillan.
- Monteiro, C.A., Cannon, G., Moubarac, J.C., et al. (2018) The UN Decade of Nutrition, the NOVA Food Classification and the Trouble with Ultra-Processing. Public Health Nutrition, 21(1), pp. 5-17.
- Muchlinski, P. (2007) Multinational Enterprises and the Law. Oxford University Press.
- Ruggie, J.G. (2013) Just Business: Multinational Corporations and Human Rights. W.W. Norton & Company.
- Sethi, S.P. (2003) Setting Global Standards: Guidelines for Creating Codes of Conduct in Multinational Corporations. John Wiley & Sons.
- World Health Organization (2019) Global Action Plan on Physical Activity 2018–2030: More Active People for a Healthier World. WHO Press.
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