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BUSINESS AND HUMAN RIGHTS
BUSINESS AND HUMAN RIGHTS
Why are human rights relevant to businesses? The Law Society says: “The ramifications of legal liability in relation to human rights violations are crystallising with new cases being brought every day. The need for law firms to advise clients on business and human rights is increasing. And law firms themselves need to look at their own obligations as businesses.”
The history of business and human rights: most people think of human rights in the context of the protection of individuals from threats by the state and attributing to the state the obligation to secure the conditions that are necessary for people to live a life of dignity, respect and safety. Globalisation, the problems of which were highlighted most recently in our minds by the pandemic and Russia’s invasion of Ukraine, was an issue that the United Nations (UN) started to examine in the 1990s. Initially the driving force was because of issues relating to multinational corporations operating globally and seeking more robust and enforceable rules to protect foreign investors and intellectual property. Also, and initially separately, the protection of people and the environment became international and national issues.
In 2000 the UN Secretary-General launched a UN Global Compact1 as a platform to engage companies in the support of universal values as an adjunct to promoting and amplifying businesses and to make positive contributions to the many pressing needs of the world’s societies. Dr John Ruggie was appointed the Special Representative of the Secretary-General to address the issue of business and human rights. On 16 June 2011 the UN Human Rights Council unanimously endorsed the Guiding Principles (GP) that had been formulated by Dr Ruggie. It was the first authoritative guidance that the United Nations had ever issued on how to meet the complex global challenges of business and human rights. It was also the first time that the Human Rights Council, or its predecessor the Human Rights
Commission, had ever endorsed a text on any subject that the governments of UN member countries had not negotiated between themselves.
The Guiding Principles 2 : These build on the recognition that at a global level corporate conduct is shaped by three distinct government systems. The first is the system of public law and governance, domestic and international. The second, is a civil governance system involving social compliance mechanisms. The third is corporate governance which internalises elements of the other two. The GP prescribe paths for strengthening and better aligning these governance systems in relation to business and human rights and to create a mutually reinforcing dynamic that produces change.
For states the focus is on the legal obligations they have under the international human rights regime to protect human rights abuses by third parties, including businesses, as well as policy rationales that are consistent with and supportive of meeting those obligations.
For businesses, the GP focuses on the need to manage the risk of involvement in human rights abuses beyond compliance with legal obligations that vary across countries in their applicability and enforcement. This requires acting with due diligence to avoid infringing the rights of others and to address harm where it does occur.
For affected individuals and groups the GP serve as a basis for further empowerment through prescribed engagement with them by business enterprises as well as greater access to effective remedies both judicial and non-judicial.
In short, these principles must be protected by states, companies must respect them and those who are harmed must have redress. Core elements of the GP have been incorporated
by numerous other international and national standard-setting bodies each with their own implementation mechanisms as well as by businesses and other stakeholder groups. Additionally, the GP have resulted in the provision of national complaint mechanisms in the adhering states concerning the conduct of multinationals operating in or from those states. ISO 26000 has been introduced which resulted in worldwide consultants able to help companies come into compliance. One of those adhering states is China. The European Commission has asked member states to submit national plans for implementing the GP and the Commission itself has issued additional guidance for several industry sectors and for small and medium-sized enterprises.
The UK was the first EU country to launch its national plan to implement the GP. The Plan, which was updated in May 2020, follows the same structure as the GP, which is based on the 3 pillars: duties of the state, expectations for business, and access to remedy.3 These developments illustrate a broad convergence around a common set of politically authoritative and socially legitimated norms and policy guidance for business and human rights and, whilst there is still much work to do, they provide a strong foundation on which to build.
There remain challenges. One of those is limited capacity and this particularly affects middle and lower income countries as well as small and medium sized enterprises. Capacity is not just a resource issue. Most companies still do a poor job of assessing and aggregating at corporate level the costs to themselves of getting things wrong which typically are rolled into local operating expenses and never attract the attention of senior management, managing boards and shareholders. Poor co-ordination, where one unit creates problems that another has to try and solve, are frequent. The challenge involves both the allocation of resources and institutional re-engineering.
Dr Ruggie points out that widespread uptake of the GP by a broad array of actors, which was the intention, brings its own challenges. There is a risk that some of the coherence and cumulative momentum provided by the GP may diminish unless they are reinforced. Another problem is that states are not generally required under international human rights law to regulate the extraterritorial activities of businesses domiciled in their jurisdiction. Nor are they generally prohibited from doing so provided there is a recognised jurisdictional basis. States need to become more proactive than they have been in the past. Governments are increasingly adopting domestic measures with extraterritorial effects to help prevent corporate related human rights harm abroad by requiring companies to conduct human rights due diligence as a condition for public support. This has led to governments imposing human rights reporting requirements on companies including their global operations. A growing number of national courts are agreeing to hear cases against companies for conduct by overseas affiliates because the parent company itself may have been negligent through omission or commission.
As Dr Ruggie points out states must specify clearly that international standards prohibiting gross human rights abuses potentially amounting to international crimes apply to all persons natural and legal. Such abuses may arise in areas where human rights regime cannot be expected to function as intended for example in conflict zones or similar sources of risk where typically there are allegations involving corporate complicity in acts committed by related parties.
“Corporate complicity is an emerging area of law – it is also an area where moral questions are as important as legal ones – at least until there is more legal clarity - of what is good practice,
what is right and wrong, fair and unfair. It extends from a situation where a company has knowingly funded, supported or benefited from human rights abuse to a situation where it has been a silent witness of abuse committed by others. Where do the boundaries of complicity begin and end? On one side there is law which tells us what can and cannot be done. But we must not stop where the law rests; in protecting human rights sometimes we have to go beyond the law, where there are values and principles which are worth fighting for. To give an analogy, there is currently no international consensus on the abolition of the death penalty.” 4
Starting in the 1990s in the US and using the Alien Tort Statute, a signature legal tool, Groups began to litigate these corporate cases. A long line of cases has followed since the first victory of the kind in Doe v. Unocal. Corporations that have faced such litigation include Shell, Chevron, and Caterpillar for gross human rights violations committed outside the US. Groups like The Center for Constitutional Rights in the US have initiated and supported efforts to ensure corporate accountability by filing amicus briefs in U.S. courts and contributing to corporate accountability efforts at the international level. The most recent litigation and advocacy efforts in this area have focused on the role of U.S.-based private military contractors in the unlawful killing of civilians by Blackwater in Iraq and in the torture of civilians at the infamous Abu Ghraib prison in Iraq.5
In July 2022 the UN General Assembly voted in favour of a resolution recognising the human right to a clean, healthy and sustainable environment, the infringement of which prevents enjoyment of many other human rights. The responsibility to respect human rights applies to all business organisations. The GP’s therefore provide opportunities and challenge for the advice and services that lawyers give to their business clients. Mandatory due diligence proposals are currently pending in the UK and in many other states, including the EU where the current draft proposes mandatory human rights and environmental due diligence to EU and to non-EU companies whose annual sales in the EU single market exceeds certain financial thresholds. There are also emerging domestic laws concerning human rights abuses such as the Magnitsky laws and those relating to the seizure or prohibition of imported goods manufactured in a manner which involves forced labour. Stock Exchange listings in many countries require reporting of human right risks. These developments have caused dedicated business and human rights and environment social and governance (ESG) legal practice groups to be created in law firms.
Investors are increasingly using ESG factors to assess a company’s impact on stakeholders and the resulting harm to the company’s shareholders. The S (social) aspect is heavily engaged with human rights and the E (economic) aspect includes environmental issues that trigger human rights such as the right to life and the right to a clean, healthy and sustainable environment. The G (governance) aspect includes verifying whether board oversight is sufficient to meet human rights and environmental commitments.
Litigation involving human rights and related environmental claims have been brought against multinational companies for alleged harm. In 2019 and 2021 the UK Supreme Court issued two landmark decisions ruling that a parent company may owe a duty of care to the claimants concerning environmental damage and human rights abuses caused by a foreign subsidiary, where the parent undertakes to supervise the company’s actions in question and fails to take active steps to ensure the subsidiary implements the parent’s policies and fails to take active steps to prevent harm. Other legal jurisdictions
such as Canada, Netherlands, Germany and France are following suit. Many countries including the UK have or are considering legislation to prohibit Strategic Lawsuits against Public Participation (SLAPPs) because these have been utilised in domestic jurisdictions around the world to protect companies against criticism of their human rights protection in relation to business operations particularly in mining, agriculture and livestock, logging and lumber and the palm oil sector. It is foreseeable that other cases relating to other human rights abuses will inevitably become the subject of litigation.
As the updated IBA Guidance Note on Business and Human Rights 6 reminds us the law is dynamic and what is considered merely unethical today could be unlawful tomorrow. Lawyers have the unique task of tracking these legal developments and advising clients on new laws and the best practice and norms that apply across supply chains and value chains of their clients. They have to ensure that their clients not only act lawfully but also meet consumer and community expectations which are shifting more towards transparency and sustainability. Businesses are realising that the management of human right risks is critical to their long-term sustainability and they will expect their lawyers, both internal and external, to advise not only on the black letter law but to act as wise counsellors in identifying and managing human rights risks and broader business risks and opportunities. Business and human rights is a growing legal practice area and clients are increasingly seeking advice on multiple binding and non-binding human rights standards that may apply to their industry, projects or business models. Law firms without credible business and human rights expertise will likely miss opportunities to serve their clients in a highly competitive international market for legal services. Some of the areas affected are environmental law, corporate governance and enterprise risk management, reporting and disclosure, mergers and acquisitions, finance, contracts, dispute resolution, and anti-trust and competition law. But business and human rights also affect other areas such as employment, labour, arbitration, tax law, intellectual property, mining law, insurance, bankruptcy law et cetera. All businesses are affected regardless of their size, sector, operational context, ownership and structure. Businesses include service providers such as law firms, architects, accountants and the like.
Law firms are part of a client’s supply chain. Law firms are subject to unique professional duties including the duty to preserve the confidentiality of client communications and the duty to provide unbiased and independent advice and services in the client’s best interest. As law firms are part of a client’s supply chain, clients will increasingly expect law firms to show that they, too, are respecting human rights and can identify and address the human rights risks that may be linked to the legal services they provide. As a consequence, there is a growing case for lawyers including corporate lawyers, law firms, internal and external counsel to take human rights into account in their professional activities and to understand how human rights and the environment affect their work. Due diligence laws are being proposed that would seek to incorporate these historically separate areas of law together. This in turn produces an increasing demand for legal advice and services in this area and an understanding of how it impacts on other legal practice areas. That in turn produces increased significant risk if it is not done. Mandatory due diligence already exists in the UK in relation to modern slavery.
Lawyers must be alert to the issue of “Greenwashing”. Greenwashing happens when a business/company makes an environmental claim about something the organisation is doing that is intended to promote a sense of environmental impact that does not exist. The green claim is typically about some form of positive effect on the environment. Greenwashing involves making an unsubstantiated claim to deceive consumers/clients into believing that a business or product is environmentally friendly or has a greater positive environmental impact than they actually do. Some businesses use greenwashing to capitalise on the socially responsible or environmental, social, and governance (ESG) investing movement.
As the updated IBA Guidance Note on Business and Human Rights reminds us:
“This fast-changing landscape presents challenges including for lawyers and law firms in their capacity as businesses with their independent responsibility to respect human rights and the environment both in the management of the firm and in the legal services provided to clients. Lawyers play a unique role in advising their clients on how to conceptualise these risks and meet the various reporting requirements relevant to a company under human rights and environmental due diligence (in whichever way it is presented in domestic law), as well and in international and domestic law and work cohesively as a profession to facilitate the growing implementation of the GP’s across the world.”
And a final word from Dr Ruggie: “I suspect that many of you here today were surprised, as I was, by the results of the U.S. presidential election (when Trump was elected). I also suspect that many of you were surprised, as I was, by the results of the Brexit referendum. Perhaps we should not have been. As far back as January 1999 Kofi Annan warned, in a World Economic Forum speech, that unless globalization has strong social pillars it will be fragile and vulnerable—“vulnerable to backlash from all the ‘isms’ of our post-cold war world: protectionism; populism; nationalism; ethnic chauvinism; fanaticism; and terrorism.” He specifically appealed to the business community to step up and play its role in achieving a socially sustainable globalization.
Because if it does not work for all it works for none. ■
