Piercing the State’s Corporate Veil: Using Private Actors to Enforce International Norms

Russia’s invasion of Ukraine is a tragedy of statehood: a state no longer recognises its neighbour’s right to exist. Yet, the wider resistance to this invasion has highlighted the role of private individuals and corporations in enforcing fundamental international law norms. The involvement of the private sector has helped to globalise the conflict. Individuals and companies have come to be treated as, and to portray themselves as, global political actors in their own right, and not merely as subjects of international law.

This piercing of the state’s corporate veil can be seen in several ways. Ukrainian and Western governments have explicitly called on global companies to help uphold international norms, with companies responding directly. Some global corporations are going beyond state requirements to disengage from Russia in a way that is arguably tantamount to imposing their own sanctions, sometimes using international norms when justifying their action. Some states have imposed sanctions on private Russian ‘oligarchs’ because they have interpersonal connections with Putin in hope that this will influence his decision-making – i.e. going beyond just holding them accountable in their own right. In their justification for sanctions, these states have also recognised that private citizens have helped undermine and/or threaten Ukraine’s sovereignty and territorial integrity, showing a willingness to recognise that private action influences the state regime.                 

Leveraging the power of global private corporations to pressure Russia into ending its violations of international norms

The response to Russia’s aggression shows the role played by global corporations in helping to uphold fundamental international norms, including the prohibition of unlawful force and the right of territorial integrity. From Apple to Ikea to General Motors, numerous companies have disengaged from Russia. Sometimes this is to comply or align with sanctions and trade restrictions imposed by home states, but governments have also sought to leverage the private sector—individuals and corporations—to put pressure on Russia to end its aggression.

For example, Ukrainian officials have called on global companies for assistance: ‘During a call with almost 300 US lawmakers, Ukrainian president Volodymyr Zelensky had asked for Visa and Mastercard privileges to be cut off for the Russian people’ (the companies have now suspended operations in Russia). Digital Minister Mykhailo Fedorov urged major tech companies to support Ukraine and boycott Russia. He posted the letters—and some replies—on his Twitter feed so that ‘the world can see’. PayPal’s announcement that it was suspending services in Russia ‘appeared on Fedorov’s Twitter feed before it was reported in the media. So too did news that Samsung and Nvidia are stopping all business with Russia, something he publicly called for on his social feeds.’ Within 48 hours of calling out Elon Musk, the billionaire ‘had adjusted his constellation of Starlink satellites and sent a lorry-load of internet-ready terminals to Ukraine’. In the wake of the news that Shell was continuing to buy Oil from Russia, Ukrainian Foreign Minister Dmytro Kuleba called ‘on all conscious people around the globe to demand multinational companies to cut all business ties with Russia’. Days later, Shell apologised and announced that it is pulling out of the Russian oil and gas market.

These examples show how the state’s veil is being pierced to respond to Russia’s aggression: a state official (Ukrainian) calls on (global) corporations and individuals to put pressure on corporations to put economic pressure on the state (Russia) breaching international norms. Ukrainian officials thus see individuals as a means of leveraging the power of private and political actors (and this is made possible at scale by another private actor, the global digital platform), and see the active involvement of the private sector as a key strategy in responding to Russia’s aggression.

It is not just the Ukrainian government that is taking this approach. As they did during the pandemic, several Western governments have called on global digital platforms to remove disinformation: the UK’s Culture Secretary ‘urged Meta, TikTok, and Twitter to restrict access to the Russian state-owned organisations which she accused of spreading “damaging propaganda into Britain”’. The EU and Australian government made a similar request – Australia’s Communication Minister explicitly linked this request to upholding international norms:

‘in the interests of protecting sovereignty and territorial integrity, the Australian government asks that [your platform] takes such action in respect of content disseminated on your platform[s] in Australia’.

When platform companies implement international norms (e.g., on protecting free speech) or act in response to violations of international norms (e.g., sovereignty/territorial integrity), they are also playing a crucial role in enforcing these norms.

One key difference between the pandemic and Russia’s aggression is that Western governments have called on digital platforms to restrict the state media content of a single state. Several platforms have blocked Russian-state channels and taken aggressive steps to remove disinformation. Global platforms enjoy a degree of relative independence from the state because they must develop the technical ability to implement regulatory measures, and because of the difficulty of regulating global speech, given the diversity of state views on what this means in practice, and from the fact that states give them the some space to do this. However, this independence is tempered by the fact that they are also sensitive to government demands and they are under pressure from home-state governments to protect digital speech across their network. Twitter, for example, removed posts by the Russian embassy in London about the Mariupol hospital bombing, ‘following criticism [of the Tweet] from Downing Street’. The UK Prime Minister was asked whether he would like social media platforms to close the embassy’s accounts and his spokesperson replied: ‘That’s obviously a matter for Twitter, but we’ve been clear that this is disinformation’. In this sentence, he arguably recognised the company’s regulatory role and signalled what he expected it to do. Russia has responded to the actions of platform companies by adopting a ‘fake news’ law and banning various platforms from operating in Russia, raising serious concerns about democracy and free speech.

Global Corporations as International Norm Enforcers

Global corporations are not only acting as international norm enforcers at the behest of states. Some companies have disengaged because of new legal restrictions, but for others it is a more amorphous motivation, rooted in economic and reputational risk-analysis, and with social responsibility concerns. Many consumer and tech companies have disengaged from Russia and/or have removed Russian-origin products from their shelves in Europe, UK and US – sometimes in advance of state action, sometimes to align with sanctions, other times going beyond what is required by the law.

A key part of the picture is that individual outrage at the aggression and egregious breach of international norms is being translated to social pressure on business to disengage, raising the economic and reputational-risk of operating in/with Russia (as Shell discovered). In other words, companies may be reacting to consumer and reputational (and thus economic) risks, but these are risks in the first place because of the social pressure on corporations to uphold international norms. Ruggie might have argued that corporations no longer have a ‘social licence’ to operate, but instead of being a social licence to operate locally, it is a global licence to operate in states other than Russia because of a corporation’s decision to operate with/in Russia. Leveraging a social expectation that businesses do not engage with states committing human rights abuses is hardly new—not even in moments of crisis (e.g., South African apartheid and crackdowns on protests in Hong Kong)—but the speed and scale at which this has occurred is striking. So too is the fact that governmental actors in Ukraine have sought to harness this outrage and direct it towards companies to get them to disengage with Russia.

Some global corporations are invoking international norms in their justification for going further than complying with state-based restrictions on working in/with Russia. BP’s decision to divest its 19.75% stake in Russian energy company Rosneft was explained by BP Chair Helge Lund as a response to Russia’s attack on Ukraine as ‘an act of aggression’. ExxonMobil announced that it ‘deplore[s] Russia’s military action that violates the territorial integrity of Ukraine’, and PayPal stated that the company ‘stands with the international community in condemning Russia’s violent military aggression in Ukraine). Microsoft claimed that Russia has breached the Geneva Convention through cyber-attacks as it suspended it sales in the country. Law firms have also ‘sever[ed] ties with Kremlin-linked groups and oligarchs’—Siobhán Lewington, Managing Director of an international legal recruitment firm, told the Financial Times that

‘[a]part from commercial and reputational risks, there is also the [Environmental, Social, and Governance] risk… particularly the human rights implications of Russia’s invasion of Ukraine’.

It  thus appears that some global companies are going beyond state-required action, arguably working to impose sanctions themselves ‘in a way that has surprised many veteran observers’. In this respect, private actors are not just operating as conduit for the enforcement of international norms, but as sites of political influence and power in their own right.

Targeting private individuals for leverage on the Russian state

Targeting individuals to undermine war effort has a long history (dating back to the Lieber Code) but what is perhaps striking about the current conflict is that the EU, UK, and US have targeted private Russian ‘oligarchs’ not just to hold them to account but because of their interpersonal connections to Putin and the possibility that they could influence his decision-making. Mikhail Fridman (founder of the Alfa Group) and Oleg Deripaska have called for an end to the conflict and for peace talks to begin ‘as fast as possible’, and Alexei Mordashov announced that Russia and Ukraine ‘must do everything necessary so that a way out of this conflict is found in the very near future’. Evgeny Lebedev—not yet sanctioned—used the front page of the newspaper he owns, the Evening Standard, to call for an end to the conflict: ‘President Putin, please stop this war’, possibly to ward off possible sanctions.

These sanctions are about undermining the war effort, but they also recognise that, in some cases, private individuals can influence state decision-making: that Putin’s regime (and regimes in general) extends beyond the official categories of state official that international law typically recognises. This is also reflected in the fact that some private individuals are being targeted because they helped undermine Ukraine’s sovereignty and territorial integrity. For example, the EU imposed sanctions on Fridman because he:

‘has managed to cultivate strong ties to the administration of Vladimir Putin, and has been referred to as [an] enabler of Putin’s inner circle. […] He also supported actions or policies which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine.’ (The EU gave the same/near-identical explanations for imposing sanctions on other private individuals and the Gas Industry Insurance Company.)

From an international law perspective, it is interesting to see recognition that private individuals are ‘undermin[ing]’ and ‘threaten[ing]’ what are typically viewed as inter-state norms. In the Kosovo Advisory Opinion, the ICJ explained that ‘the scope of the principle of territorial integrity is confined to the sphere of relations between States’. The crucial distinction appears to be whether the private individuals are acting through a state—or influencing a state—to breach these norms. In Kosovo, the Court was addressing the argument that a prohibition of unilateral declarations of independence is implicit in the principle of territorial integrity (i.e., the right of territorial integrity limited what could be done in the exercise of self-determination), and the ICJ considered that the authors of the declaration were not acting as/through a state. In contrast, the EU is concerned with how individuals are ‘support[ing] actions or policies which undermine’ territorial integrity of Ukraine. This distinction is also illustrated by Article 8bis of the Rome Statute, which defines ‘act of aggression’ as including the ‘use of armed force by a State against the sovereignty, territorial integrity or political independence of another State’: an individual, who is in a position effectively to exercise control over or to direct the political or military action of a State is thus held responsible for their role in undermining territorial integrity (inverting the terms used for attribution of conduct to a state for the purposes of state responsibility). International law is thus sometimes prepared to look behind the state’s violation of territorial integrity to see who is making the violation possible (what is sometimes called in the corporate context ‘veil peeking’), even though the norm is breached only through what international law considers to be ‘state’ action.   

Piercing the state’s corporate veil to enforce fundamental international norms

States have responded to Russia’s invasion of Ukraine by recognising and treating individual private action as a contributing factor to state action and as means of helping to enforce international norms. Governments are leveraging the private sector to put pressure on Russia; some private individuals and corporations are acting as international norm enforcers (not just as conduits for the implementation of state-imposed restrictions); and states are targeting private individuals for leverage on the Russian state and in recognition of their role in undermining international norms formally breached through state conduct. 

Using the private sector in this way helps to globalise the conflict and could represent a new way of addressing prohibited uses of force. Of course, whether this proves to be successful, and how robust and altruistic corporate responses will prove after the first wave of public attention subsides, remain to be seen. In cases less clear-cut than Russia’s current aggression, there might be concerns about selectivity, given the uneven distribution of corporate power and ability of publics to shape global reputations. It will also likely be individuals who are less well-off that bear the cost of enforcing international norms in this way, as the economic fallout begins to bite. Nevertheless, these efforts show a potential global power of individuals and companies which traditional international law often does not recognise, and with which it will increasingly have to grapple.