Research Handbook on Human Rights and Business 2020933652, 9781786436405, 9781786436399

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© The Editors and Contributors Severally 2020

Cover image: Photo by Ronaldo de Oliveira on Unsplash. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library Library of Congress Control Number: 2020933652 This book is available electronically in the Law subject collection DOI 10.4337/9781786436405

ISBN 978 1 78643 639 9 (cased) ISBN 978 1 78643 640 5 (eBook)

Surya Deva and David Birchall - 9781786436405

Contents

List of contributorsviii 1

From ‘business or human rights’ to ‘business and human rights’: what next? Surya Deva

PART I

1

HUMAN RIGHTS AND BUSINESS: HISTORY AND EVOLUTION

2

The history of ‘business and human rights’ and its relationship with corporate social responsibility Florian Wettstein

3

The rise and fall of the Alien Tort Statute Beth Stephens

4

The social construction of the UN Guiding Principles on Business and Human Rights John Gerard Ruggie

PART II

23 46

63

CORPORATE HUMAN RIGHTS DUE DILIGENCE

5

Human rights due diligence in theory and practice Mark B. Taylor

88

6

Human rights due diligence and the (over) reliance on social auditing in supply chains Justine Nolan and Nana Frishling

108

7

Humanising the global supply chain: building a ‘decent work’ environment in the readymade garments supply industry in Bangladesh Mia Mahmudur Rahim

130

8

Human rights due diligence and extractive industries Daniela Chimisso dos Santos and Sara L. Seck

151

PART III REGULATORY ROLE AND TOOLS OF STATES 9

The use of disclosure-based regulation to advance the state’s duty to protect Jena Martin

176

10

State jurisdiction over transnational business activity affecting human rights Doug Cassel

198

11

Human rights responsibilities of state-owned enterprises Larry Catá Backer

223

v Surya Deva and David Birchall - 9781786436405

vi  Research handbook on human rights and business 12

Human rights and public procurement of goods and services Claire Methven O’Brien and Olga Martin-Ortega

245

PART IV HUMAN RIGHTS’ INTERACTION WITH TRADE, INVESTMENT AND FINANCE 13

Framing the broader context of business and human rights: the impact of trade agreements on human rights Markus Krajewski

14

Human rights law and the investment treaty regime Jesse Coleman, Kaitlin Y. Cordes and Lise Johnson

15

The multilateral development banks and the management of the human rights impacts of their operations Daniel D. Bradlow and Andria Naudé Fourie

PART V

269 290

315

HEIGHTENED HUMAN RIGHTS RISKS: GROUPS AND/OR OPERATING CONTEXT

16

Business and indigenous peoples’ human rights Jernej Letnar Černič

335

17

Protecting the most vulnerable: embedding children’s rights in the business and human rights project Jonathan Kolieb

18

Business and human rights in transitional justice: challenges for complex environments379 Tara Van Ho

354

PART VI ACCESS TO REMEDY AND CORPORATE ACCOUNTABILITY: OPPORTUNITIES AND CHALLENGES 19

Access to effective remedy: the role of information Nicola Jägers

20

The role of civil society and human rights defenders in corporate accountability 422 David Birchall

21

Liability within corporate groups: parent companies’ accountability for subsidiary human rights abuses Radu Mares

22

Remedy is the reason: non-judicial grievance mechanisms and access to remedy471 Mariëtte van Huijstee and Joseph Wilde-Ramsing

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403

446

Contents  vii 23

National human rights institutions and their (extended) role in the business and human rights field Humberto Cantú Rivera

492

24

Atrocities and victim redress: the opportunities and challenges of international criminal justice Joanna Kyriakakis

513

Index534

Surya Deva and David Birchall - 9781786436405

Contributors

David Birchall is Visiting Fellow at City University of Hong Kong School of Law. His research primarily focuses on business and human rights, socio-economic rights and socio-economic justice under globalization. He completed his PhD in August 2019 and has published several articles on the UN Guiding Principles on Business and Human Rights, as well on the binding treaty, corporate power and the commodification of human rights. He is the co-editor of the Business and Human Rights Journal blog, and the founder and convenor of the City University of Hong Kong Law School Emerging Scholars Association. Daniel D. Bradlow is SARCHI Professor of International Development Law and African Economic Relations, University of Pretoria and Professor Emeritus, American University Washington College of Law. He was previously the first Head, International Economic Relations and Policy Department, South African Reserve Bank; Director, International Legal Studies Program, American University Washington College of Law; Chair, Roster of Experts, Independent Review Mechanism, African Development Bank; member, International Law Association’s Committee on Accountability of International Organizations; member, African Commission on Human and People’s Rights Working Group on Extractive Industries, the Environment and Human Rights; and has been a consultant to numerous international organizations and civil society organizations. He has published articles and books on accountability of international financial institutions, finance and human rights, development and human rights and global economic governance. Humberto Cantú Rivera is Professor at the School of Law and Social Sciences of the University of Monterrey, and Executive Director of its Human Rights and Business Institute. He holds a PhD from Panthéon-Assas (Paris II) University, and has participated as Expert Advisor for the Delegation of Mexico in negotiations on the business and human rights treaty process, as well as in the efforts to develop a National Action Plan on Business and Human Rights. He is Director of the Latin American Branch of the Global Business and Human Rights Scholars Association, and was a member of the ILA Study Group on the topic. Doug Cassel is Emeritus Professor of Law and Notre Dame Presidential Fellow Emeritus at Notre Dame Law School in the USA, where he taught, published articles and litigated in the fields of public international law, international human rights law and business and human rights. Among other publications, he co-authored with Anita Ramasastry the White Paper: Options for a Treaty on Business and Human Rights (2015) for the American Bar Association’s Center for Human Rights and the Law Society of England and Wales. Currently he advises business lawyers and corporate executives on matters of business and human rights. He holds a BA in economics from Yale and a JD from Harvard Law School. Larry Catá Backer is W. Richard and Mary Eshelman Faculty Scholar, Professor of Law and International Affairs at Pennsylvania State University (BA Brandeis University; MPP Harvard University Kennedy School of Government; JD Columbia University). He teaches and researches in the areas of economic globalization, corporate social responsibility, interviii Surya Deva and David Birchall - 9781786436405

Contributors  ix national affairs, global governance, trade and finance. He teaches courses in corporate law, CSR, multinational corporations and international institutions, as well as on law and religion and constitutional law, and lectures globally. He has published extensively on the UN Guiding Principles, as well as on the development of the theory and practice of CSR as philanthropy, as a human rights project and in the context of sustainability and development. He has authored or edited books on comparative corporate law, globalization and the US legal system. His short essays on many of these topics may be found on his blogsite: ‘Law at the End of the Day’.  Daniela Chimisso dos Santos is Principal Consultant at Invenient Solutions Consulting, and has practised law in the oil, gas and mining industries for 20 years. She has extensive national and international experience, including in Sub-Saharan Africa, South America and Asia. The United Nations Development Programme recently recognized her as an extractives expert. Daniela has lectured at several law faculties, including the University of Western Ontario, University of Toronto and Osgoode Hall Professional Development. Her research interests include institutional change, the role of multinational enterprises in development, business and human rights law, finance and development.  Jesse Coleman is a Senior Legal Researcher at the Columbia Center on Sustainable Investment. Her work includes a focus on the nexus of human rights law and international investment. Jesse holds a BA in Political Science and an LL.B. (Laws) from Trinity College Dublin, and an LLM from the University of Cambridge, where she specialized in public international law. Kaitlin Y. Cordes is a public international lawyer. She is Head of Land and Agriculture, as well as Lead: Human Rights and Investment, at the Columbia Center on Sustainable Investment. Prior to joining the Center, Kaitlin worked with the Africa Division of Human Rights Watch and served as an adviser to the UN Special Rapporteur on the Right to Food. She has also worked with a range of social justice organizations in the US and India. Surya Deva is Associate Professor at the School of Law of City University of Hong Kong, and a Member of the UN Working Group on Business and Human Rights.  Professor Deva’s primary research interests lie in business and human rights, India-China constitutional law and sustainable development. He has published extensively in these areas, and has advised UN agencies, governments, multinational corporations and civil society organizations on matters related to business and human rights. His books include Building a Treaty on Business and Human Rights: Context and Contours (coeditor with David Bilchitz) (CUP, 2017), Socio-Economic Rights in Emerging Free Markets: Comparative Insights from India and China (editor) (Routledge, 2015); Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect? (co-editor with David Bilchitz) (CUP, 2013); and Regulating Corporate Human Rights Violations: Humanizing Business (Routledge, 2012). He is one of the founding editors in chief of the Business and Human Rights Journal, and sits on the Editorial/Advisory Board of the Netherlands Quarterly of Human Rights and the Vienna Journal on International Constitutional Law.  Nana Frishling is PhD Candidate at UNSW Law. Her dissertation assesses the role of multistakeholder initiatives in regulating the human rights impacts of supply chains. She is also an experienced lawyer, having worked in private practice (Herbert Smith Freehills) and as a Senior Legal Officer in the Office of International Law at the Commonwealth

Surya Deva and David Birchall - 9781786436405

x  Research handbook on human rights and business Attorney-General’s Department. In the latter role, she advised the Australian government on public international law and human rights law, and worked on the successful defence of Philip Morris’ challenge to Australia’s tobacco plain packaging laws. Nicola Jägers holds the Chair in International Human Rights Law at the Law School of Tilburg University in the Netherlands. She is also a Commissioner at the Netherlands Institute for Human Rights, the official NHRI. In her work, Jägers focuses on the transformations that have occurred in international human rights law relating to changes in the relationships between states and markets and changes in the regulatory roles and capacities of NGOs and transnational business corporations. In 2002, Jägers published one of the earliest books on the issue of corporate responsibility for human rights violations: Corporate Human Rights Obligations: In Search of Accountability. More recently, she has begun to consider the ways in which regulatory approaches might be useful for the enforcement, socialization and protection of human rights. She is also a member of the Dutch government’s Advisory Committee on International Affairs, a member of the Executive Board of the Netherlands Quarterly of Human Rights and a board member of the Netherlands Network for Human Rights Research. Lise Johnson leads the Columbia Center on Sustainable Investment’s work on investment law and policy. Her work at CCSI centres on analysing the contractual, legislative and international legal frameworks governing international investment, and shaping the impacts that those investments have on sustainable development objectives. She holds a BA from Yale University, a JD from University of Arizona and an LLM from Columbia Law School, and is admitted to the bar in California. Jonathan Kolieb is Senior Lecturer in Law at the Graduate School of Business and Law, RMIT University. He holds degrees from the University of Melbourne (PhD; BA/LLB), the University of California – Berkeley (LLM; MA) and Monash University (BA Hons) and has been a visiting fellow at Australian National University and George Washington University. Jonathan has been engaged as an external legal consultant by the United Nations’ Office of the Special Representative of the Secretary-General for Children and Armed Conflict, and as research partner of Australian Red Cross. His research interests focus on global governance issues, including projects on the legal protections of children in armed conflict and the human rights obligations of transnational corporations operating in conflict-affected areas. Markus Krajewski is Professor at the University of Erlangen-Nürnberg and holds the Chair in Public and International Law. He is one of the programme directors of the MA in Human Rights and chairperson of the Interdisciplinary Research Centre for Human Rights Erlangen-Nürnberg (CHREN). He also chairs the Board of Trustees of the German Institute for Human Rights. Markus Krajewski studied law, economics and political science at the University of Hamburg and the Florida State University. Before taking up his current position he taught at King’s College London, the University of Potsdam and the University of Bremen. His research focuses on international economic law, human rights, European external relations and the law of public services. He also advises international governmental and non-governmental organisations on European and international economic law and has acted as a consultant in different development cooperation projects. Joanna Kyriakakis is Senior Lecturer in Law at Monash University, Australia, and Deputy Director of the Castan Centre for Human Rights Law. An SJD (PhD equivalent) on cor-

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Contributors  xi porations and the international criminal court, she is the author of numerous articles on accountability where businesses are involved in serious human rights abuses. In addition to teaching and research, she has delivered human rights and international criminal law training to Australian and foreign government officials and educators, and worked with civil society groups on Australian business and human rights initiatives.  Jernej Letnar Černič is Associate Professor of Constitutional and Human Rights Law at the Faculty of Government and European Studies, Nova Univerza (Ljubljana and Kranj, Slovenia), and Senior Research Fellow at the University Institute of European Studies – IUSE (Turin, Italy). He has written extensively on business and human rights, human rights law and international law. His work has been cited in reports by the United Nations, European Parliament, the Council of Europe and the Constitutional Court of Slovenia and in academic studies worldwide. Radu Mares is Associate Professor at the Raoul Wallenberg Institute of Human Rights and Humanitarian Law (RWI), Lund University, Sweden. With a background in international human rights law, he is specialized in the area of business and human rights, with a focus on regulatory aspects raised by multinational enterprises and global value chains. He has written on the relation between law and self-regulation, on corporate responsibilities in the mining industry and supply chain contexts and on the regulatory and governance implications of the UN Guiding Principles on Business and Human Rights. Mares edited The UN Guiding Principles on Business and Human Rights – Foundations and Implementation (2012) and authored ‘Securing human rights through risk-management methods: Breakthrough or misalignment?’ in the Leiden Journal of International Law (2019) and ‘De-centring human rights from the international order of states – the alignment and interaction of transnational policy channels’ in the Indiana Journal of Global Legal Studies (2016). Jena Martin is a professor at West Virginia University College of Law. She has written extensively on many issues, including the intersection of securities regulation and human rights impacts. She is the author of several articles on the subject, including The End of the Beginning? A Comprehensive Examination of the U.N.’s Business and Human Rights Agenda (Fordham J. Corp. Financial Law), which earned her the law school’s Significant Scholarship Award. In addition, Professor Martin has co-edited and co-authored a number of books in the field of securities regulation and business and human rights, including The Business and Human Rights Landscape: Moving Forward, Looking Back (Cambridge University Press); When the Levees Break: Re-visioning Regulation of the Securities Markets (Lexington Books) and When business harms human rights: affected communities that are dying to be heard (Anthem Press). She has presented her research at the United Nations. Olga Martin-Ortega is Professor of International Law at the School of Law, University of Greenwich, UK. She leads the Business, Human Rights and the Environment Research Group (BHRE, www​.bhre​.org). She is a member of the Board of Directors of the London Universities Purchasing Consortium and a member of the Board of Trustees of Electronics Watch and CORE (Coalition for Corporate Accountability). Her publications include (with Claire Methven O’Brien, eds) Public Procurement and Human Rights: Opportunities, Risks and Dilemmas for the State as Buyer (Edward Elgar, 2019); (with Rebecca Wallace) International Law (Sweet & Maxwell, 2020, 9th edition) and (with Chandra Sriram and Johanna Herman) War, Conflict and Human Rights (Routledge, 2017, 3rd edition).

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xii  Research handbook on human rights and business Claire Methven O’Brien is Chief Adviser, Business and Human Rights, at the Danish Institute for Human Rights, Baxter Fellow at the School of Law, University of Dundee, and Honorary Lecturer at the University of St. Andrews School of Management. Her publications include the Council of Europe’s Handbook on Business and Human Rights (2019) and (with Prof. Olga Martin-Ortega) Public Procurement and Human Rights: Opportunities, Risks and Dilemmas for the State as Buyer (Edward Elgar, 2019). She leads the DANIDA-funded research programme ‘Realising the SDGs: The role of responsible business’ (2018–22). Andria Naudé Fourie is Research Fellow with the Department of International and European Union Law at the Erasmus School of Law, Erasmus University Rotterdam. Her professional experience extends across countries and industries, having worked both as a business consultant with Accenture in their Retail Banking and Resources practices and as an academic researcher and lecturer at the Erasmus School of Law. She holds PhD and LLM degrees in Public International Law from the Erasmus University Rotterdam, as well as post-graduate qualifications in business and alternative dispute resolution from the University of Pretoria. Her research and publications focus on the operationalization of accountability, sustainable development and human rights within the broader transnational development context. Justine Nolan is Professor at UNSW Law and Visiting Scholar at the NYU Stern Center for Business and Human Rights. She has published widely on business and human rights and modern slavery and advises companies, NGOs and governments on these issues. Her most recent book is Addressing Modern Slavery (2019), co-authored with Martijn Boersma. Prior to joining UNSW in 2004, she was the Director of Business and Human Rights at the Lawyers Committee for Human Rights (now Human Rights First) in the US; prior to that she worked as a corporate lawyer.  She is on the Editorial Board of the Business and Human Rights Journal. Mia Mahmudur Rahim is Associate Professor in Law at the University of New England. Previously he worked at the University of South Australia, Queensland University of Technology and the Bangladesh Judiciary. He completed a Bachelor of Laws with Honours and Masters of Laws from Dhaka University, a Masters in International Economic Law from Warwick University, a Masters in Public Administration from the National University of Singapore and a PhD from the School of Law at Macquarie University. His research interests lie in different forms of regulation and how these relate to legal structures that encourage the social responsibility and accountability practice of regulatees. One of his recent books, Legal Regulation of Corporate Social Responsibility, explained how a meta-regulation mode in law can effectively raise social responsibility performance of corporations. He is the author of Corporate Social Responsibility in Private Enterprises and the editor of Social Audit Regulation and the Code of Conduct on Transnational Corporations. John Gerard Ruggie is Berthold Beitz Professor in Human Rights and International Affairs at Harvard’s Kennedy School of Government and Affiliated Professor in International Legal Studies at Harvard Law School. Ruggie’s scholarship contributed to the social constructivist approach to the study of international relations and international lawmaking, for which he has received numerous academic awards. He is a Fellow of the American Academy of Arts & Sciences, and surveys in Foreign Policy magazine have identified him as one of the 25 most influential international relations scholars in North America. From 1997 to 2001, Ruggie served as UN Assistant Secretary-General for Strategic Planning in the cabinet of Secretary-General Kofi Annan. His responsibilities included overseeing the creation of the UN Global Compact,

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Contributors  xiii as well as proposing and gaining General Assembly approval for the Millennium Development Goals. In 2005, Annan appointed Ruggie as UN Special Representative for Business and Human Rights. Six years later, the UN Human Rights Council unanimously endorsed the ‘Guiding Principles on Business and Human Rights’ that Ruggie developed. Core elements have been adopted or explicitly drawn upon by numerous other national and international standard setting bodies, business enterprises and other stakeholder groups, making them the most authoritative and widely used global standard in this space. His book reflecting on that experience, Just Business: Multinational Corporations and Human Rights, has been translated into Chinese, Japanese, Korean, Portuguese and Spanish. For his contribution to the development of international law, Ruggie has received awards from the American Bar Association, the Washington Foreign Law Society and the International Association of Impact Assessment. Sara L. Seck is Associate Professor and Associate Dean, Research, at the Schulich School of Law and Marine & Environmental Law Institute at Dalhousie University in Nova Scotia, Canada. In 2015 she received the Emerging Scholarship Award from the IUCN’s Academy of Environmental Law in recognition of her research contributions on sustainable mining and international law. Sara is the coeditor of Global Environmental Change and Innovation in International Law (Cambridge University Press, 2018), and has published extensively on business and human rights issues with particular attention to environmental and climate justice, including intersectional dimensions of gender and indigenous rights. She is a member of the Business and Human Rights Scholars Association, a founding member of the editorial board of the Business and Human Rights Journal, a deputy director of the Global Network for the Study of Human Rights and Environment and a member of the International Law Association. Beth Stephens, Distinguished Professor of Law, Rutgers Law School, New Jersey, USA, has written extensively on business and human rights, including ‘Making Remedies Work: Envisioning a Treaty-Based System of Effective Remedies’ in Surya Deva and David Bilchitz (eds) (2017), Building a Treaty on Business and Human Rights: Context and Contours; ‘Are Corporations People? Corporate Personhood Under the Constitution and International Law’ (2014) 44 Rutgers LJ; and ‘The Amorality of Profit: Transnational Corporations and Human Rights’ (2002) 20 Berkeley J Int’l L 45. Other articles address the relationship between international and domestic law. She was an advisor to the American Law Institute’s Restatement (Fourth) of the Foreign Relations Law of the United States and served as legal consultant to a network of human rights groups formulating proposals for a treaty on business and human rights. As a cooperating attorney with the Center for Constitutional Rights, Professor Stephens continues to litigate human rights cases. Mark B. Taylor is Senior Researcher at the Fafo Institute for Labour and Social Research, Oslo, Norway. Mark’s research focuses on legal and policy frameworks applicable to responsible business, with core themes being sustainability, human rights and the international regulation of economic dimensions of war. A former Research Director at Fafo and a former Managing Director of Fafo’s international research institute (Fafo AIS), Mark has served as an advisor to governments, trade unions, civil society organizations, businesses and international organizations. Mark began his career as a journalist in Canada and as a human rights analyst for the United Nations in the Middle East. He holds an LLM from Leiden University in the Netherlands and a PhD in international law from the University of Oslo, Norway.

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xiv  Research handbook on human rights and business Tara Van Ho is Lecturer in the School of Law and Human Rights Centre, University of Essex, where she directs the post-graduate taught programmes in human rights. A core member of the Essex Business and Human Rights Project, she has advised intergovernmental organizations, states and non-governmental organizations on issues of business and human rights, with a particular focus on post-conflict transitions. Mariëtte van Huijstee, PhD is Senior Researcher for SOMO (the Centre for Research on Multinational Corporations, based in the Netherlands) and specializes in the international normative framework in the field of business and human rights, in particular the United Nations Guiding Principles on Business and Human Rights. She examines how companies and governments implement their responsibilities and obligations to respect human rights. Mariëtte chairs the Dutch civil society platform advocating for corporate accountability regulation, the so-called MVO Platform. She also advises and trains civil society organisations in developing different strategies to secure respect for human rights and environment in the private sector. Mariëtte holds a PhD from Utrecht University’s Copernicus Institute of Sustainable Development. Her dissertation focused on how NGOs influence businesses to ensure corporate responsibility. Florian Wettstein is Chair and Professor of Business Ethics and Director of the Institute for Business Ethics at the University of St. Gallen in Switzerland. Florian has published widely on topics at the intersection of corporate responsibility, business ethics and business and human rights. He is the author of Multinational Corporations and Global Justice: Human Rights Obligations of a Quasi-Governmental Institution (Stanford University Press, 2009) and Editor-in-Chief of the Business and Human Rights Journal (BHRJ), published by Cambridge University Press. Florian is a past fellow of MIT’s Program on Human Rights and Justice. He serves as Vice-President (president elect 2020–24) of the International Society for Business, Economics and Ethics (ISBEE) and of the Global Business and Human Rights Scholars Association. Joseph Wilde-Ramsing is Senior Researcher for SOMO (the Centre for Research on Multinational Corporations, based in the Netherlands), specializing in corporate accountability issues in the energy, extractives and financial sectors. He contributes to SOMO’s work on business and human rights, including coordination of the OECD Watch network. He frequently assists communities and workers in asserting their rights and seeking remedy for corporate abuse. Joseph holds a PhD from the University of Twente’s Centre for Studies in Technology and Sustainable Development (CSTM). His dissertation focused on sustainable development and corporate accountability in the global energy sector.

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1. From ‘business or human rights’ to ‘business and human rights’: what next? Surya Deva

1.

THE JOURNEY SO FAR

The interface between human rights and business is perhaps as old as the notions of ‘business’ and ‘rights’.1 This interface is also inescapable because both human rights and business enterprises have a universal presence as well as relevance. However, the main thrust of the interface between human rights and business has been changing over the years. In my view, this evolution can be analysed in terms of three broad eras each with a distinct thrust: the ‘business or human rights’ era, the ‘business and human rights’ (BHR) era and the ‘business of human rights’ era. Before I explain these three eras in this chapter, let me flag three points. First, the three eras described here do not have a strict separation. While these eras are sequential at least in their origin, they do not have a clear start or end point. The three eras now exist in parallel with a change in the dominant theme. For example, while currently the BHR era is dominating the scene, there may still be some voices vouching for the business or human rights era. Second, although the third era – the business of human rights – is still in its infancy, I expect this to gain traction and perhaps become more dominant in coming years. The basis of this prediction is discussed below. Third, while the debate continues about the relationship between BHR and CSR,2 this debate does not capture fully how the interface of business and rights has evolved over years at a holistic level, rather than merely from a CSR or BHR lens. I think both CSR and BHR – and even RBC (responsible business conduct) – share the common starting point of corporations having responsibilities beyond their shareholders. However, key differences exist regarding the normative basis of corporate responsibilities, the nature and extent of these responsibilities, the process of identifying individuals and communities to whom responsibilities are owed, and the modus operandi of enforcing corporate responsibilities in cases of noncompliance.

For an excellent account of how the operations of the British East India Company impacted people and their rights during the seventeenth and the eighteenth centuries, see William Dalrymple, The Anarchy: The East India Company, Corporate Violence and the Pillage of an Empire (Bloomsbury Publishing, 2019). 2 See Chapter 2 in this Handbook. See also Chris Avery, ‘The Difference between CSR and Human Rights’ (August/September 2006), www​.business​-humanrights​.org/​sites/​default/​files/​reports​ -and​-materials/​Avery​-difference​-between​-CSR​-and​-human​-rights​-Aug​-Sep​-2006​.pdf (accessed 18 December 2019); Florian Wettstein, ‘CSR and the Debate on Business and Human Rights: Bridging the Great Divide’ (2012) 22:4 Business Ethics Quarterly 739; Anita Ramasastry, ‘Corporate Social Responsibility versus Business and Human Rights: Bridging the Gap between Responsibility and Accountability’ (2015) 14 Journal of Human Rights 237. 1

1 Surya Deva - 9781786436405

2  Research handbook on human rights and business Human rights embody important values of universal relevance. This collective understanding cannot be shaken by continued violations of human rights by both states and non-state actors in all world regions. Nor can it be shaken by certain political leaders dismissing or misappropriating the language of human rights, or some scholars rightly reminding us of the dangers inherent in both the overreach of human rights as well as their limits.3 Similarly, businesses in some form are present everywhere. In fact, one can hardly do anything nowadays without some assistance or contribution on the part of corporations. Nevertheless, many scholars and business leaders long took the position that respecting human rights or performing social responsibilities was not the business of business. I will label this as the ‘business or human rights’ era. The famous Berle–Dodd debate in the early 1930s was illustrative of this era,4 in which Berle argued that corporations should exercise their power only for the benefit of their shareholders. Berle’s views were taken forward forcefully by Milton Friedman,5 who famously argued that in a free market economy, the only social responsibility of business is to maximise profits for shareholders. More recent support for this line of thinking is offered by Elaine Sternberg.6 For her, the ‘defining purpose of business is maximising owner value over the long term by selling goods or services’7 and using ‘business resources for non-business purposes [social responsibility] is tantamount to theft’.8 I will suggest that the ‘shareholder primacy’ model is also rooted in the philosophy of the business or human rights era. The views of Berle, Friedman and Sternberg did not go unchallenged.9 The validity of the shareholder primacy model too has been contested on legal, normative and practical grounds,10 and not many corporations would now claim – at least publicly – that their sole objective is to maximise profits irrespective of any adverse impact on society. Consequently, the business or human rights era has lost much of its steam, though traces of it can still be seen. For example, the continued overemphasis on the business case for human rights suggests that corporations

See, e.g., David Kennedy, ‘International Human Rights Movement: Part of the Problem?’ (2002) 5 Harvard Human Rights Journal 101; Eric Posner, ‘The Case against Human Rights’ (4 December 2014), www​.theguardian​.com/​news/​2014/​dec/​04/​-sp​-case​-against​-human​-rights (accessed 18 December 2019); Dominique Clément, ‘Human Rights or Social Justice? The Problem of Rights Inflation’ (2012) 22 International Journal of Human Rights 155; Samuel Moyn, Not Enough: Human Rights in an Unequal World (Belknap Press, 2018). 4 Adolph A Berle, ‘Corporate Powers as Powers in Trust’ (1931) 44 Harvard Law Review 1049; E Merrick Dodd, ‘For Whom Are Corporate Managers Trustees?’ (1932) 45 Harvard Law Review 1145; Adolph A Berle, ‘For Whom Are Corporate Managers Trustees: A Note’ (1932) 45 Harvard Law Review 1365. 5 Milton Friedman, Capitalism and Freedom (Chicago University Press, 1962); Milton Friedman, ‘The Social Responsibility of Business Is to Increase Its Profits’, New York Times Magazine (13 September 1970), 33. 6 Elaine Sternberg, Just Business: Business Ethics in Action, 2nd edn (Oxford University Press, 2000). 7 Ibid, 32 (emphasis in original). 8 Ibid, 41 (emphasis in original). 9 For an analysis, see Surya Deva, Regulating Corporate Human Rights Violations: Humanizing Business (Routledge, 2012) 119–39. 10 See Paddy Ireland, ‘Company Law and the Myth of Shareholder Ownership’ (1999) 62 Modern Law Review 32; Jennifer Hill, ‘Visions and Revisions of the Shareholder’ (2000) 48 American Journal of Comparative Law 39; Beate Sjåfjell and Mark B Taylor, ‘Clash of Norms: Shareholder Primacy vs. Sustainable Corporate Purpose’ (2019) 13 International and Comparative Corporate Law Journal 40. 3

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From ‘business or human rights’ to ‘business and human rights’  3 still need to justify demands to respect human rights in terms of profit maximisation.11 But if human rights are merely tools to make more profit or avoid risk to corporations, why the pretence about corporations becoming more socially responsible? In fact, Friedman was critical of CSR being used as a cloak for actions that could be justified for corporate self-interest.12 Although the usage of the term ‘business and human rights’ has a more recent origin, the BHR era started taking root around the early 1970s.13 The UN Economic and Social Council’s appointment of a Group of Eminent Persons in 1973 to study the impact of transnational corporations on economic development and international relations;14 the OECD and the ILO releasing soft norms outlining responsibilities of multinational enterprises in 1976 and 1977 respectively;15 the launch of the Sullivan Principle in 1977 to articulate the role of corporations in fighting apartheid in South Africa;16 and the 1984 Bhopal gas disaster, which killed thousands of people in India,17 incrementally but firmly grounded the BHR era. By the early 1990s, the BHR era had begun to gain prominence (including as a result of several high-profile cases under the Alien Tort Statue (ATS) as well as civil society advocacy and reports18), while the business or human rights era had begun to weaken significantly. A distinctive component of the BHR era has been development of standards – the ‘new rules of the game’ – by states, international organisations, multi-stakeholder groups, corporations, industry associations, civil society organisations (CSOs), lawyer associations and academics to guide business behaviour. I will focus here only on the role of the United Nations (UN) in developing BHR-related standards. The UN’s engagement with BHR standard setting could be divided into four distinct phases, each with a distinct approach. In the first phase, which lasted for about two decades (1974–92), the debate and disagreements revolved around ‘rights versus responsibilities’: while developing countries wanted to impose obligations on TNCs, developed countries’ priority was to secure fair treatment rights for such companies in host states. This phase ended with the UN in 1992 suspending negotiations on the proposed Code of Conduct on Transnational Corporations.

See John Morrison, ‘The Business Case for Human Rights – Values, Expectations and Risk’ (28 April 2011), www​.ihrb​.org/​uploads/​speeches/​2011​-4​-28​,​_IHRB​_Speech​,​_The​_Business​_Case​_for​ _Human​_Rights​_​%23U2013​_Values​,​_Expectations​_and​_Risk​.pdf; Michael Posner, ‘Making the Business Case for Human Rights’ (3 March 2015), https://​bhr​.stern​ .nyu​.edu/​blogs/​2018/​12/​22/​making​-the​-business​-case​-for​-human​-rights (accessed 18 December 2019); Gowri Kangeson, ‘Arguing the Business Case for Respecting Human Rights’ (4 November 2016), www​ .dlapiper​.com/​en/​australia/​insights/​publications/​2016/​11/​arguing​-the​-business​-case​-for​-human​-rights/​ (accessed 18 December 2019). 12 Friedman, ‘The Social Responsibility of Business Is to Increase Its Profits’. 13 In Chapter 2 of this Handbook, Wettstein considers the 1970–95 period as a precursor to BHR. 14 ‘The UN and Transnational Corporations’ (Briefing Note 17 July 2009), www​.unhistory​.org/​ briefing/​17TNCs​.pdf (accessed 18 December 2019). 15 Deva, Humanizing Business, 80–2, 88–90. 16 ‘The Sullivan Principles’, https://​www​.bu​.edu/​trustees/​boardoftrustees/​committees/​acsri/​ principles (accessed 18 December 2019). 17 Dominique Lapierre and Javier Moro, It Was Five Past Midnight in Bhopal (Full Circle Publishing Ltd, 2001). 18 See Institute for Human Rights and Business, Building a Movement: Reflections on the History and Future of Business and Human Rights (December 2019) 14–17, www​.ihrb​.org/​uploads/​reports/​ Building​_a​_Movement​_Reflections​_on​_the​_History​_and​_Future​_of​_Business​_and​_Human​_Rights​_​ -​_IHRB​.pdf (accessed 18 December 2019). 11

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4  Research handbook on human rights and business During the second phase (1998–2004), the discourse revolved around ‘voluntary versus binding’ regulations. One process resulted in the development of the 2003 Draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights. The Norms were declared by the then Commission on Human Rights to have ‘no legal standing’. The voluntary process, on the other hand, resulted in the formal launch of the Global Compact in 2000, with nine principles in the areas of human rights, labour rights and the environment.19 The third phase was the mandate of Professor John Ruggie, the former Special Representative of the Secretary-General on human rights and transnational corporations and other business enterprises, which lasted six years (2005–11). Ruggie’s mandate was guided by ‘principled pragmatism’ and resulted in the Human Rights Council’s unanimous endorsement of the UNGPs in June 2011.20 The fourth phase began in June 2014 with the Human Rights Council adopting a resolution to establish an open-ended intergovernmental working group ‘whose mandate shall be to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises’.21 This resolution created a ‘soft versus hard’ law cleavage – similar to the second phase – between the implementation of the UNGPs and a push to develop a binding instrument. Another strand of the approach during this phase has been the ‘conflict versus complementary’ relation between the UNGPs and the proposed treaty. In standard setting during the BHR era, the UNGPs stand out: their contribution in pushing the BHR agenda is well-documented, including by the author of the UNGPs, Professor Ruggie.22 In addition to achieving alignment of standards and actions in line with a commonly accepted framework, the UNGPs have facilitated the socialisation of human rights norms among businesses, a prerequisite to ensuring corporate respect as well as corporate accountability for human rights. This progress, however, should not mask that not much has yet changed for the rightsholders on the ground. It also seems that even the human rights due diligence practice of major multinational corporations leaves much to be desired.23 A 2018 report of the UN Working Group on Business and Human Rights also concluded that ‘the majority of business enterprises around the world remain unaware, unable or unwilling to implement human rights due diligence as required of them in order to meet their responsibility to respect human rights’.24

A tenth principle related to anticorruption was added in 2004. For a critique, see Surya Deva and David Bilchitz (eds), Human Rights Obligations on Business: Beyond the Corporate Responsibility to Respect? (Cambridge University Press, 2013). 21 OHCHR, ‘Open-Ended Intergovernmental Working Group on Transnational Corporations and Other Business Enterprises with Respect to Human Rights’, www​ .ohchr​ .org/​ EN/​ HRBodies/​ HRC/​ WGTransCorp/​Pages/​IGWGOnTNC​.aspx (accessed 18 December 2019). 22 See Chapter 3 in this Handbook. See also John G Ruggie, Just Business: Multinational Corporations and Human Rights (WW Norton & Company, 2013). 23 For example, 49 per cent of the largest publicly traded 200 companies score 0 across all indicators related to human rights due diligence. Corporate Human Rights Benchmark, ‘2019 Key Findings’, www​.corporatebenchmark​.org/​sites/​default/​files/​2019​-11/​CHRB2019KeyFindingsReport​.pdf (accessed 18 December 2019). 24 ‘The report of the Working Group on the issue of human rights and transnational corporations and other business enterprises’, A/73/163, para 93. 19 20

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From ‘business or human rights’ to ‘business and human rights’  5 A lack of tangible progress in corporations walking the walk on human rights due diligence has led to momentum building for mandatory legislation in Europe and others parts of the world.25 Despite civil society advocacy, and reform options having been on the table for several years,26 states have not shown a similar willingness to remove barriers to access to effective remedies and hold corporations accountability for human rights abuses. However, some recent court decisions have opened the door to hold parent corporations accountable for abuses committed by their subsidiaries, often in countries with bigger regulatory gaps.27

2.

WHAT NEXT: THE BUSINESS OF HUMAN RIGHTS?

While the BHR era is still dominating the interface between human rights and business, I will argue that a new era – that of the business of human rights – has started emerging. Corporations and industry associations have begun to co-opt the language of human rights to serve their business interests. I will describe below several developments and trends that are illustrative of this shift towards the business of human rights. 2.1

Birth of a New Industry

One by-product of the UNGPs has been the evolution of a new industry of consultants advising corporations on how to conduct human rights due diligence. Some of these consultants have even incorporated themselves as ‘non-profit organisations’. Corporate executives are not generally trained to manage complex human rights issues and hence corporations might need some external advice on how to discharge their responsibilities under the UNGPs or other BHR standards. This demand for external expert advice has resulted in the mushrooming of a private industry which is becoming part of the problem in the process of solving another problem. When BHR consultant organisations start (i) seeing the UNGPs or SDGs as a business opportunity, (ii) making a business case for human rights to secure buy-in from corporations, (iii) identifying salient human rights issues based on convergence of risk to people and risk to

BHRRC, ‘National & Regional Developments on Mandatory Human Rights Due Diligence’, https://​www​.business​-humanrights​.org/​en/​mandatory​-due​-diligence/​national​-regional​-developments​-on​ -mandatory​-human​-rights​-due​-diligence (accessed 18 December 2019). 26 See, e.g., Gwynne Skinner, Robert McCorquodale and Olivier De Schutter, The Third Pillar: Access to Judicial Remedies for Human Rights Violations by Transnational Business (ICAR, 2013); Amnesty International, ‘Creating a Paradigm Shift: Legal Solutions to Improve Access to Remedy for Corporate Human Rights Abuse (Amnesty International, 2017); ‘Improving access to remedy in the area of business and human rights at the EU level: Opinion of the European Union Agency for Fundamental Rights’, FRA Opinion–1/2017 (2017); ‘OHCHR Accountability and Remedy Project’, www​.ohchr​.org/​EN/​Issues/​Business/​Pages/​OHCHRaccoun​tabilityandremedyproject​.aspx; UN Working Group on Business and Human Rights, ‘Access to Remedy’, www​.ohchr​.org/​EN/​Issues/​Business/​Pages/​ AccessToRemedy​.aspx (accessed 18 December 2019). 27 See, e.g., Chandler v Cape [2012] EWCA Civ 525; Choc v Hudbay Minerals Inc 2013 ONSC 1414; Vedanta Resources PLC v Lungowe [2019] UKSC 20; Esther Kiobel v Royal Dutch Shell PLC [2019] ECLI:​NL:​RBDHA:​2019:​4233; Nevsun Resources Ltd v Araya 2020 SCC 5. See also Marilyn Croser et al ,‘Vedanta v Lungowe and Kiobel v Shell: The Implications for Parent Company Accountability’ (2020) 5:1 Business and Human Rights Journal, DOI: https://​doi​.org/​10​.1017/​bhj​.2019​.25. 25

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6  Research handbook on human rights and business the business, (iv) competing for their share in the funding pie offered by states, development agencies and corporations, and (v) passing themselves off as CSOs to gain legitimacy, one can see that human rights-based approaches are no longer the guiding mantra for these consultants. 2.2

Corporate Influence in the UN

Corporate capture of the state and democracy is nothing new.28 What is relatively newer is the influence of corporations – as compared to other non-state actors – over various BHR-related UN agencies and processes. The Global Compact provides an early example of this phenomenon.29 In 2000, the UN issued Guidelines on a Principle-based Approach to the Cooperation between the United Nations and the Business Sector.30 These Guidelines provide that UN partnerships with the private sector ‘should maintain the integrity of the United Nations, its independence and impartiality’, must advance UN goals and should not give an unfair advantage to any business entity or its products or services.31 The UN will engage with corporations that demonstrate a ‘commitment to respecting and implementing’ the UNGPs and will not engage corporations which ‘contribute to or are otherwise complicit in human rights abuses, tolerate forced or compulsory labour or the use of child labour’.32 While these Guidelines look good on paper, their application in practice in guiding the UN engagement with the private sector does not give much confidence. For example, the OHCHR’s partnership with Microsoft should give the latter advantage over its competitors, not least because Microsoft will ‘develop advanced technology in the form of a dashboard – Rights View – that will provide the [OHCHR] teams an overview of the human rights situation in specific countries in order to better predict, analyse and respond to crisis’.33 Moreover, the current cash-crunch at the UN agencies and the 2030 Agenda for Sustainable Development have made these UN agencies more anxious to forge partnership with the private sector, thus opening windows for corporations to influence UN processes. For example, in December 2016, the UN General Assembly by a unanimous vote agreed to grant the International Chamber of Commerce (ICC) observer status in the General Assembly.34 The decision – hailed 28 Dalrymple writes: ‘the East India Company probably invented corporate lobbying. In 1693 … the EIC was discovered for the first time to be using its own shares for buying parliamentarians, annually shelling out £1,200 a year to prominent MPs and ministers.’ Dalrymple, The Anarchy, xxvii. See also Alyssa Katz, The Influence Machine: The U.S. Chamber of Commerce and the Corporate Capture of American Life (Spiegel & Grau, 2015); Camaren Peter et al, Shadow State: The Politics of State Capture (Wits University Press, 2018). 29 See Surya Deva, ‘Global Compact: A Critique of UN’s “Public-Private” Partnership for Promoting Corporate Citizenship’ (2006) 34 Syracuse Journal of International Law & Commerce 107. 30 OHCHR, ‘Guidelines on a Principle-Based Approach to the Cooperation between the United Nations and the Business Sector’, www​.ohchr​.org/​Documents/​Issues/​Business/​2​.Guideline​ sPrincipleBasedApproach​.pdf (accessed 18 December 2019). These Guidelines were revised in 2009 and 2015. 31 Ibid, paras 10, 11 and 14. 32 Ibid, paras 15 and 16. 33 OHCHR, ‘Partners’, www​.ohchr​.org/​Documents/​Issues/​Business/​4​.Partners​.pdf (accessed 18 December 2019). The UN’s partnership with Tencent is perhaps more worrying. Mary Hui, ‘The UN is partnering with China’s biggest surveillance software company’, https://​qz​.com/​1830789/​un​-partners​ -with​-chinas​-tencent​-surveillance​-software/​ (accessed 2 April 2020). 34 ‘Observer status for the International Chamber of Commerce in the General Assembly’, A/ RES/71/156 (13 December 2016).

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From ‘business or human rights’ to ‘business and human rights’  7 as ‘unprecedented’ even by the ICC35 – was to ‘give greater opportunities to the business community to contribute to the realization of the goals and programmes’ of the UN.36 The increasingly close partnership between the UN and the private sector gives corporations unprecedented access to influence all UN processes and agencies engaged with the BHR agenda. By way of comparison, it is worth noting here that the International Labour Organization (ILO) is a tripartite UN agency which engages not only states but also both employers and worker representatives37 – thus giving trade unions a counter-balancing role against corporate lobbying. However, other UN agencies have not institutionalised such a tripartite model, and giving certain non-governmental organisations (NGOs) consultative status is not the same thing as interacting with civil society on the same footing as states.38 2.3

Controlling the BHR Narrative

Corporations and industry associations are also proactively controlling and shaping the BHR discourse (including regulatory initiatives) in a way that is conducive to their business objectives. Businesses are creating the public impression of being leaders in respecting human rights, but without bringing any fundamental changes to their current business models. I will offer four illustrative examples to buttress this point. My first example is two letters written by Larry Fink, the Chief Executive Officer (CEO) of BlackRock, to CEOs of companies in which BlackRock invests trillions of dollars. In the 2018 letter, Fink wrote: Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate. Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders.39

Fink followed this with a 2019 letter that reiterated the vision of ‘sustainable, long-term growth and profitability’ and asserted that ‘[p]rofits are in no way inconsistent with purpose – in fact, profits and purpose are inextricably linked’, because companies ‘that fulfill their purpose and responsibilities to stakeholders reap rewards over the long-term. Companies that ignore them stumble and fail.’40 These two letters appear to be very forward-looking and visionary. However, serious doubts remain as to whether BlackRock is really walking the talk – for instance, after specific allegations that BlackRock is the world’s largest investor

‘ICC Granted UN Observer Status’, 13 November 2016, https://​iccwbo​.org/​media​-wall/​news​ -speeches/​un​-general​-assembly​-grants​-observer​-status​-international​-chamber​-commerce​-historic​ -decision/​. 36 A/RES/71/156. 37 ILO, ‘Tripartite Constituents’, www​.ilo​.org/​global/​about​-the​-ilo/​who​-we​-are/​tripartite​-con​stit​u​ ents/​lang​-​-en/​index​.htm (accessed 18 December 2019). 38 ‘Basic Facts about ECOSOC Status’, http://​csonet​.org/​?menu​=1​ 00 (accessed 18 December 2019). 39 BlackRock, ‘A Sense of Purpose’, www​.blackrock​.com/​corporate/​investor​-relations/​2018​-larry​ -fink​-ceo​-letter (accessed 18 December 2019). 40 BlackRock, ‘Purpose & Profit’, www​.blackrock​.com/​corporate/​investor​-relations/​larry​-fink​-ceo​ -letter (accessed 18 December 2019). 35

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8  Research handbook on human rights and business in deforestation of the Amazon in Brazil,41 BlackRock provided a brief, general and evasive response.42 Moreover, its human rights and labour standards policy makes no reference to any international standards and focuses only on its employees.43 Second, in August 2019, Business Roundtable – perhaps taking its cue from Fink’s letters – issued a statement on the purpose of a corporation signed by 181 CEOs who commit to conduct business for the benefit of all stakeholders, rather than merely shareholders.44 The statement, which is a direct response to growing demands to move away from the shareholder primacy model,45 may suggest leading corporations committing to bringing a fundamental shift in their business model. However, it is remarkable that the statement does not use the term ‘rights’ or ‘human rights’ even once. Therefore, even if a shift were to take place in practice in future, it is unlikely to be rights-based. Third, while almost all major corporations are supporting the UNGPs, some of these corporations as well as leading industry associations continue to resist any attempt made at the national or international level to impose binding obligations, even if those are in line with Pillar II of the UNGPs. Opposition to mandatory human rights due diligence legislation in Switzerland is a case in point.46 Similarly, the International Organisation of Employers and other industry associations continue to adopt a binary position: while reiterating their commitment to fully implement the UNGPs, they question the need for a binding international instrument,47 even if that might build on the UNGPs and may assist in their implementation. Fourth, businesses also invoke concept frameworks such as the ‘smart mix’ of regulation, multistakeholderism and collaborative engagement to their advantage. While corporations support the need for a smart mix of measures, they continue to oppose binding regulations, without which there will be no real mix ever. Although smart mix is the favoured approach in the BHR field, it is puzzling that corporations want only binding rules in the domain of trade and investment. Moreover, one should ask a more fundamental question: the regulatory mix is smart for whom – for businesses or for rightsholders? Similarly, multistakeholderism is often employed to mask existing asymmetries of information, power, resources and influence among various stakeholders. Unless proactive steps are taken to address these asymmetries, 41 Friends of the Earth US, Amazon Watch and Profundo, ‘BlackRock’s Big Deforestation Problem’, https://​amazonwatch​.org/​assets/​files/​2019​-blackrocks​-big​-deforestation​-problem​.pdf (accessed 18 December 2019). 42 ‘Response from BlackRock’ (30 October 2019), www​.business​-humanrights​.org/​sites/​default/​ files/​documents/​Response​%20from​%20BlackRock​_0​.pdf (accessed 18 December 2019). 43 BlackRock, ‘Human Capital: Our Commitment’, www​.blackrock​.com/​corporate/​responsibility/​ human​-capital (accessed 18 December 2019). 44 Business Roundtable, ‘Statement on the Purpose of a Corporation’, https://​ opportunity​ .businessroundtable​.org/​wp​-content/​uploads/​2019/​12/​BRT​-Statement​-on​-the​-Purpose​-of​-a​-Corporation​ -with​-Signatures​.pdf (accessed 18 December 2019). 45 See, for example, Frank Bold, ‘The Purpose of the Corporation Project’, www​.purposeofcorporation​ .org/​en and University of Oslo, ‘SMART: Sustainable Market Actors for Responsible Trade’, www​ .smart​.uio​.no/​(accessed 18 December 2019). 46 See, e.g., BHRRC, ‘Companies Clarify Position on Swiss Mandatory Human Rights Due Diligence Initiative’, www​.business​-humanrights​.org/​en/​companies​-clarify​-position​-on​-swiss​-mandatory​-human​ -rights​-due​-diligence​-initiative (accessed 18 December 2019). 47 ‘Joint Business Response to the Revised Draft Legally Binding Instrument to Regulate, in International Human Rights Law, the Activities of Transnational Corporations and Other Business Enterprises’, (October 2019), https://​www​.ioe​-emp​.org/​index​.php​?eID​=​dumpFile​&​t​=​f​&​f​=​145680​&​ token​=​​9dbcc1f8414128d575cd6bef9f36b84ec106a386 (accessed 18 December 2019).

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From ‘business or human rights’ to ‘business and human rights’  9 corporations and their interests are likely to have an upper hand in what comes out of the multistakeholderism. 2.4

The Sustainable Development Goals (SDGs) Becoming a Business Opportunity

States expect the private sector to play a key role in realising the SDGs.48 Businesses are called upon ‘to apply their creativity and innovation to solving sustainable development challenges’ and protect ‘labour rights and environmental and health standards in accordance with relevant international standards and agreements’.49 States also look towards the private sector, which is a key constituent of the Global Partnership for Sustainable Development,50 to generate funds to implement the SDGs. As compared to the Millennium Development Goals, the SDGs have a closer connection with human rights.51 Nevertheless, the UNGPs and the SDGs appear to be two siblings born four years apart with little connection. The UNGPs do not make any explicit connection between human rights (or human rights due diligence for that matter) and development, though development agencies and development finance institutions are expected to consider adverse human rights impacts of their activities.52 On the other hand, only paragraph 67 of the UN resolution on the SDGs makes a reference to the UNGPs, but without mentioning the term ‘human rights’ or underlining the importance of the corporate responsibility to respect human rights to the realisation of the SDGs. This lack of coherence between the UNGPs and the SDGs contributed to corporations and some organisations presenting the latter as a business opportunity to the private sector. For example, in its 2017 report, Better Business, Better World, the Business and Sustainable Development Commission makes a business case for the Global Goals and notes: ‘We make the case that businesses adopting this plan will transform their own prospects and could outperform those stuck in yesterday’s economic game: this is about return on capital, not just responsibility.’53 To counter the potential risk of the SDGs bringing back corporate philanthropy, the UN Working Group on Business and Human Rights issued ten recommendations reminding both states and businesses not to forget the relevance of ‘protect, respect and remedy’ framework.54 However, in practice, many corporations seem to feel more comfortable

UN General Assembly, ‘Transforming Our World: the 2030 Agenda for Sustainable Development’, A/Res/70/1, paras 39, 41 and 60. 49 Ibid, para 67. 50 Ibid, para 60; Goal 17. 51 Danish Institute for Human Rights, ‘The Human Rights Guide to the Sustainable Development Goals’ (2016), https://​ sdg​ .humanrights​ .dk/​ en (accessed 18 December 2019); Markus K ­ altenborn, Markus­Krajewski and Heike K ­ uhn, ‘Introduction’ in Kaltenborn, Krajewski and Kuhn (eds), Sustainable Development Goals and Human Rights (Springer Open, 2019) 1. 52 Commentary to Principles 4 and 7. 53 Business and Sustainable Development Commission, Better Business, Better World (2017), 7, 12–14 (emphasis added), http://​report​.businesscommission​.org/​uploads/​BetterBiz​-BetterWorld​_170215​ _012417​.pdf (accessed 18 December 2019). 54 ‘The Business and Human Rights Dimension of Sustainable Development: Embedding “Protect, Respect and Remedy” in SDGs Implementation’ (30 June 2017), www​.ohchr​.org/​Documents/​Issues/​ Business/​Session18/​InfoNoteWGBHR​_SDGRecommendations​.pdf (accessed 18 December 2019). 48

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10  Research handbook on human rights and business cherry-picking SDGs or indulging in SDG-washing,55 rather than mitigating, preventing and remediating adverse human rights impacts of their activities. This shift is visible even on the UN Global Compact’s website, with its ten principles disappearing from the top tabs on its website.56 2.5

The Business Case for Human Rights

The over-emphasis on the business case for human rights by various actors, including UN agencies and governments, is problematic: this, in essence, makes corporate compliance with human rights norms dependent on economic interests. Supporting and standing up for human rights is much easier when doing so serves business interests. The real test for business commitment to human rights is in situations when corporations side with human rights even if doing so might not make economic sense by reducing risks, increasing profits or gaining competitive advantage.

3.

WHAT OUGHT TO HAPPEN?

If the business of human rights era gains traction in coming years as per my analysis in the previous section, this would mean BHR end up becoming the ‘new CSR’. To pre-empt such a possibility, several course-corrective steps must be taken to rescue BHR from corporate capture. Some of these steps are outlined below. 3.1

Taking Rights and Rightsholders Seriously

What do ‘rights’ really mean in BHR? If an interest is recognised as a (human) right, then this implies two things at the minimum: first, the relevant dutyholders have corresponding legally binding obligations, and second, the rightsholders are able to seek effective remedies for violations of such a right. However, the term ‘rights’ in BHR hardly means rights in this sense, both on paper and in practice.57 While the voluntary versus binding dichotomy is not helpful, corporations must have legally binding and enforceable human rights obligations as a precondition for doing business. These obligations need not be tied exclusively to the traditional model of rule-making and rule-enforcement by the state.58 Moreover, voluntary norms See Namit Agarwal, Uwe Gneiting and Ruth Mhlanga, Raising the Bar: Rethinking the Role of Business in the Sustainable Development Goals (Oxfam, 2017); PWC, ‘New Global Goals: Are They Business Critical?’, www​.pwc​.com/​gx/​en/​services/​sustainability/​sustainable​-development​-goals/​ sdg​-research​-results​.html; Adam Fishman, ‘Responsible Business Report Finds High Risk of “SDG Washing”’ (29 May 2018), http://​sdg​.iisd​.org/​news/​responsible​-business​-report​-finds​-high​-risk​-of​-sdg​ -washing/​(accessed 18 December 2019). 56 See ‘United Nations Global Compact’, www​.unglobalcompact​.org/​(accessed 18 December 2019). 57 Hengeveld argues that ‘corporate voluntarism is transforming rights into favors, replacing accountability with responsibility and advancing the false notion that corporations don’t need binding obligations to bequeath the global marketplace with the “human face” Kofi Annan begged them for’. Maria Hengeveld, ‘The UN Goes to Davos’, The Nation (13 November 2019), www​.thenation​.com/​ article/​un​-davos​-corporate/​ (accessed 18 December 2019). 58 See Surya Deva, ‘Multinationals, Human Rights and International Law: Time to Move beyond the “State-Centric’ Conception?” in Jernej Letnar Černič and Tara Van Ho (eds), Human Rights and Business: Direct Corporate Accountability for Human Rights (Wolf Legal Publishers, 2015) 27. 55

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From ‘business or human rights’ to ‘business and human rights’  11 would still have a key role to play, as binding norms, for example, are slow to respond to new societal challenges. Availability of effective remedies to the victims of business-related human rights abuses is another pre-condition of certain interests being labelled as rights, because rights without remedies do not mean much in practice. The UNGPs stress the important role of both states and businesses in realising effective remedies. As the UN Working Group on Business and Human Rights articulated in its 2017 report, effectiveness of remedies should be judged from the perspective of rightsholders, remedial mechanisms should be responsive to the diverse experiences and expectations of rightsholders, remedies should be effective both in terms of process and outcome, and affected rightsholders should be able to seek a ‘bouquet of remedies’ without any fear of victimisation.59 Much more needs to done to achieve these normative aspirations about access to justice. Corporations should keep in mind not only all human rights, but also the holders of these rights. Human rights are not mere abstract aspirations; rather, they are vital to the dignity and development of real human beings. Keeping rightsholders on the radar should help corporate executives in overcoming business dilemmas and making correct decisions about human rights. Experiential learning by living with communities should enable corporate executives to make more informed decisions not merely about how they conduct human rights due diligence but also how they go about conducting business. They may also usefully employ the talisman offered by Gandhi in 1948. He wrote: I will give you a talisman. Whenever you are in doubt or when the self becomes too much with you, apply the following test. Recall the face of the poorest and the weakest man whom you may have seen and ask yourself if the step you contemplate is going to be of any use to him. Will he gain anything by it? Will it restore him to a control over his own life and destiny? In other words, will it lead to Swaraj [freedom] for the hungry and spiritually starving millions? Then you will find your doubts and your self melting away.60

If corporate executives start considering the impact of their decisions not on abstract groups of stakeholders but on real identified human beings at the bottom of their supply chains, then human rights due diligence will acquire an altogether new meaning. To take an illustration, there is a difference between reading a news report about an airplane crash in abstract and reading the same news report with knowledge that a close relative was on board the crashed flight. Taking rights and rightsholders seriously would also entail protecting human rights defenders, who are facing increasing threats from both states and corporations.61 Apart from legal protection and building a global network of defenders, this will require a change in the current mindset: instead of considering CSOs and human rights defenders as opponents/adversaries/

‘Report of the Working Group on the issue of human rights and transnational corporations and other business enterprises’, A/72/162 (18 July 2017). 60 ‘Gandhi’s Talisman’, www​.mkgandhi​.org/​gquots1​.htm (accessed 18 December 2019). 61 BHRRC, ‘Business, Civic Freedoms & Human Rights Defenders Portal’, www​ .business​ -humanrights​.org/​search​-human​-rights​-defenders (accessed 18 December 2019). 59

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12  Research handbook on human rights and business critics, they should be seen as ‘critical friends’. In addition to some states, a few companies have started speaking up for human rights defenders.62 This should become the new normal. 3.2

Transforming the Current Model of Development

A hard reality is that the current model of (economic) development is not rights-based. States treat human rights as a ‘speed breaker to development’. States not only focus on rising up the ‘ease of doing business’ rankings – which do not consider human rights as a variable63 – to attract foreign investment, but also label as ‘anti-development’ (and therefore ‘anti-national’) communities and CSOs resisting development projects. Despite all the rhetoric about sustainable development, the current model of development is neither sustainable nor inclusive: there lies a significant difference between ‘talking’ sustainability and ‘doing’ sustainability. Development plans are drawn at the top level without meaningful input from individuals and communities. Similarly, impact assessment processes are mostly used in practice as a tick-box legitimacy tool to approve development projects. Some corporations practise a ‘divide and rule’ policy: they try to buy ‘social licence’ by offering incentives and rewards to some members of an affected community, thus triggering frictions and tensions within the community. Unless this tension between human rights and development is resolved by transforming the current model of development, the BHR project will continue just to scratch the surface of the problem, with lip service being paid to newer challenges such as climate crisis and artificial intelligence. A starting point to achieve this transformation will be to institutionalise the people-centred development model in which plans and projects are formulated bottom-up by participation of – not consultation with – communities. 3.3

Fundamental Changes to the Role, Purpose and Operations of Corporations

BHR is essentially about reorienting the role and purpose of corporations in society. Shareholder primacy and profit maximisation continue to be the guiding mantra of doing business. In recent years, some changes have been made to corporate laws in several countries,64 something which the UNGPs also remind states to do.65 However, these changes have not been able to make fundamental structural changes so far. Let us consider one example. Section 172 of the UK Companies Act 2006 imposes a duty on directors to ‘have regard to’ various interests of non-shareholders while promoting ‘the success of the company for the benefit of

62 BHRRC, ‘Human Rights Defenders and Civic Freedoms Essential for Profitable Business, Say Major Companies’, www​.business​-humanrights​.org/​en/​human​-rights​-defenders​-and​-civic​-freedoms​ -essential​-for​-profitable​-business​-say​-major​-companies (accessed 18 December 2019). 63 The World Bank, ‘Ease of Doing Business Rankings’, www​ .doingbusiness​ .org/​ en/​ rankings (accessed 18 December 2019). 64 Surya Deva, ‘Sustainable Development: What Role for the Company Law?’ (2011) 8 International & Comparative Corporate Law Journal 76. See also Beate Sjåfjell and Benjamin J Richardson (eds), Company Law and Sustainability: Legal Barriers and Opportunities (Cambridge University Press, 2015). 65 Principle 3(b) provides that states should ‘ensure that other laws and policies governing the creation and ongoing operation of business enterprises, such as corporate law, do not constrain but enable business respect for human rights’.

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From ‘business or human rights’ to ‘business and human rights’  13 its members as a whole’. This and other changes in the UK corporate law, while a step in the right direction, have not been able to turn UK companies into socially responsible entities.66 What is needed is a fundamental change in all legal norms that interact with corporations at various stages of doing business: from incorporation to the purpose of the corporation, listing regulations, board composition, director’s duties, disclosure and transparency rules, procurement, mergers and acquisitions, accounting standards and allocation of liability within corporate groups. Businesses are undoubtedly specialised organs of society. However, this special status – which is a privilege conferred by the state rather than a right – should not be allowed to undermine collective societal goods such as human rights. In sum, the need of the hour is to reorient the role and purpose of the corporation from a profit maximising machine to an agent in service of society. Bringing such a fundamental change would also allow us to move beyond the business case for human rights. There may be a business case for human rights in certain situations: human rights-friendly corporations can avoid reputational risk, save money and time in executing projects, attract more employees and investors, and tap into unique markets for their products or services. However, there is no universal, absolute or unqualified business case for human rights for all business enterprises operating in all sectors everywhere. Therefore, while the business case may be regarded as one of the ‘push and pull’ factors to humanise business, this should not be treated as the determinative factor. Greater transparency is also needed with regard to how businesses interact with states, international organisations and CSOs. In the BHR era, the focus so far has been on transparency in relation to how corporations impact their stakeholders.67 Similar transparency is required in relation to the state–business nexus: information should be disclosed about, for example, state–investor contracts, loans by development banks and international financial institutions, corporate donations to political parties and the hiring of (ex-)government officials by industry associations (as well as hiring of corporate executives by government agencies). 3.4

Creating a Full Range of Incentives and Disincentives

Considering that most corporate executives are rational actors, states should take the lead in providing a range of incentives and disincentives to encourage businesses to respect human rights and remediate adverse impacts. State agencies should also create an environment in which market forces could reward positive pro-human rights corporate behaviour, while shunning corporations which do not take seriously their responsibility to respect human rights. As I have argued elsewhere,68 multiple regulatory measures should be employed in a cumulative and coordinated manner at national, regional and international levels to deal with difficult regulatory targets. Doing so would also require the simultaneous use of both carrot and stick. In fact, voluntary measures in the form of carrots are more effective when they operate in the shadow of binding regulations as sticks. Incentives such as tax rebates, public recognition awards, low interest bank loans, preferential treatment in public procurement and

See Nina Boeger and Charlotte Villiers (eds), Shaping the Corporate Landscape Towards Corporate Reform and Enterprise Diversity (Hart Publishing, 2018). 67 See Radu Mares, ‘Corporate Transparency Laws: A Hollow Victory?’ (2018) 36:3 Netherlands Quarterly of Human Rights 189. 68 Deva, Humanizing Business. 66

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14  Research handbook on human rights and business liberal export credit for overseas operations could be offered to those corporations that provide evidence of internalising human rights into their operations. In addition to employing traditional disincentives in the form of civil, criminal and administrative penalties, newer forms of (dis)incentives should be utilised by states. For example, the UK Parliament’s Joint Committee on Human Rights, in its 2017 report, recommended that the UK government ‘should exclude companies that have not undertaken appropriate and effective human rights due diligence from all public sector contracts’.69 Similarly, corporations which do not cooperate with state-based grievance mechanisms or which fail to respond to allegations raised by affected individuals and communities could be temporarily blacklisted from receiving state benefits. Transparency regulations aimed at disclosure of non-financial information by corporations could enable various stakeholders to exert influence on corporate decisions having an impact on human rights. Consumers have a right to know about the safety gear and training provided to workers manufacturing their electronic gadgets, or the wage a worker received for stitching a pair of trousers sold for more than USD100. Investors should also know what happened to indigenous peoples displaced by a dam built from their money or whether their money is being used to detain asylum seekers (including small children). 3.5

Cost Allocation of Business Respect for Human Rights

More clarity is required about allocation of costs related to corporate compliance with human rights. Despite all the noise around the business case, the reality is that respecting human rights is a costly business. Conducting human rights due diligence, providing workers safe working conditions, offering maternity benefits to women employees, respecting indigenous people’s right to ‘free, prior and informed consent’ and ensuring that effluents from factories do not pollute rivers – doing all this will cost money. Who should bear the cost of taking steps to make the current business model human rights compatible? In my view, the cost of corporate respect for human rights should be borne by both internal and external actors. From an internal perspective, corporations should internalise the cost of ‘knowing and showing’ how they are respecting human rights into their operational expenses. Moreover, while conducting a cost–benefit analysis of competing options or projects, corporations should include in their assessment the cost of adverse human rights impacts on society. Therefore, a project which is economically cheaper from a corporate perspective might be expensive from a sustainability perspective. Equally important will be for external stakeholders of corporations to bear the cost of businesses respecting human rights. For example, consumers should be willing to pay more for eating seafood not processed by workers operating in conditions approximating slavery. Similarly, investors should be ready to forego short-term or fast returns on their investment.

House of Lords House of Commons Joint Committee on Human Rights, Human Rights and Business 2017: Promoting Responsibility and Ensuring Accountability (April 2017), 36, https://​ publications​.parliament​.uk/​pa/​jt201617/​jtselect/​jtrights/​443/​443​.pdf (accessed 18 December 2019). 69

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From ‘business or human rights’ to ‘business and human rights’  15

4.

WHAT THE RESEARCH HANDBOOK COVERS

This section provides a brief overview of the main themes explored in this Research Handbook and the contributions made in different chapters. Part I of the Handbook sets the scene by sketching a history and evolution of BHR. After this introductory chapter, Wettstein offers critical insights on the complex relationship between CSR and BHR. After outlining the main conceptual and practical differences between BHR and CSR, he suggests that the evolution of BHR could be seen as a critique of CSR. Amid uncertainty as to how the relation between CSR and BHR will unfold in future, Wettstein discusses three potential scenarios: (i) coexistence of CSR and BHR; (ii) co-optation of BHR by CSR frameworks; and (iii) replacement of CSR by BHR. In the BHR era described above, the potential and limits of two regulatory tools have attracted most significant attention: the ATS and the UNGPs. Stephens takes us through the rise and fall of the ATS in the context of not merely well-known decisions under the ATS but also other non-ATS decisions (such as those related to pleadings and jurisdiction) and the wider international relations context. She highlights that although ATS litigation played an important role in the movement towards corporate human rights accountability, only a handful of cases are likely to survive in future, under the new interpretation of the statute adopted by the US Supreme Court in Kiobel and Jesner. In his chapter, Ruggie explains not only the social construction of the UNGPs, but also the context within which he led the project of developing the UNGPs during 2005–11. In particular, he highlights some systemic factors that shaped the global economy and polity from the 1990s into the mid-2000s, the peak of the most recent wave of globalisation, and then compares two UN initiatives proposed to better protect human rights from corporate harm: the UN Global Compact of 2000 and the 2003 Draft Norms. Such a contextual analysis allows him to showcase what the UNGPs have been able to achieve so far in the BHR field and why. Part II of the Handbook focuses on corporate human rights due diligence under the UNGPs and beyond. Taylor explores human rights due diligence in the overall normative framework set out by the UNGPs, including key concepts central to human rights due diligence such as the notions of respect, responsibility, risk and leverage. He also considers due diligence as a regulatory technique used in policy and law to encourage business respect for human rights in the context of transnational systems of production. The chapter engages with some of the critiques of human rights due diligence and suggests that the ways in which human rights due diligence will be regulated and enforced will display significant levels of diversity, though the core elements of due diligence are likely to remain at the heart of developments in the BHR field. The chapter by Nolan and Frishling examines the use of human rights due diligence as a tool to address human rights abuses in the supply chain. After highlighting some of the emerging best practice standards, the two authors turn their attention to examining how human rights due diligence is being implemented and in turn exposing the gap between theory and practice. Nolan and Frishling argue that that the continued reliance on social auditing as a primary tool for conducting due diligence is not likely to lead to better outcomes for the rights of supply chain workers and that more comprehensive and more legally-binding forms of human rights due diligence will be essential. Rahim in his chapter discusses challenges in applying ILO’s ‘decent work’ framework in the ready-made garment industry in Bangladesh. He highlights ongoing battles around wages, freedom of association and occupational health and safety, drawing a general conclusion that

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16  Research handbook on human rights and business progress has been slow to come about and sometimes quick to recede. Rahim recommends adopting a ‘new governance’ approach in which key stakeholders (both public and private) rely on each other and work together on strategies designed to reach the common goal of securing decent work. In the final chapter in this Part on corporate human rights due diligence, Santos and Seck examine the use of risk assessment tools by the extractive industry and the relationship between environmental and social risk assessment and human rights due diligence tools. They consider the limitations of current practices, including the overly business-centric nature of human rights due diligence, as well as some lacunas in due diligence concerning environmental rights, gender equality and climate change. Part III of the Handbook explores the role of states in protecting against human rights abuses by businesses, and in particular the types of regulatory tools and strategies that they could employ to discharge their obligation. Martin analyses the increased use of disclosure-based regulation being invoked in the US as well as in selected European jurisdictions such as the United Kingdom and France. Although this trend is likely to continue, she argues that the disclosure regime is at best a temporary stopgap measure that can lead to limited corporate change in the BHR field; at worst, disclosure may be used by corporations as a way to obtain a reputational advantage without actually making substantive changes. Cassel suggests that one way to close an inherent ‘governance gap’ between territorially bounded states and transnational business is for states to exercise jurisdiction over and to regulate transnational business activities. He provides an overview of contemporary international legal norms and notes a burgeoning trend towards extraterritoriality: states are sometimes obligated to regulate extraterritorially, more often encouraged to do so, and very frequently permitted to do so. Cassel argues that if human rights are to be shielded from infringement by transnational business, present trends towards greater embrace by states of their transnational jurisdiction and responsibilities must continue. Backer looks at the issue of state owned enterprises (SOE), through which the state engages in economic activities both as regulator and as producer. SOEs present regulatory difficulties due to their straddling of the barrier between state and business, particularly in light of the distinctions proposed by the UNGPs. This is further compounded by conceptual issues around what constitutes a SOE. Backer explores where and how SOEs fit into evolving BHR frameworks, and considers challenges for SOE accountability under these standards. Baker asserts that SOEs remain under-theorised within BHR literature – they represent something of a blind-spot within current BHR practice. He offers some recommendations as a way forward. O’Brien and Martin-Ortega discuss the potential of public procurement to impact positively on human rights locally and across transnational supply chains. They argue that although the ‘state duty to protect’ under Pillar I of the UNGPs calls for states to fulfil their human rights obligations as an economic actor, including in the area of public procurement, relatively little attention to date has been paid by both states and BHR scholars to government purchasing. Drawing on examples from a range of jurisdictions, O’Brien and Martin-Ortega show how integrating human rights into public buying can impact positively on human rights of supply chain workers while also being financially and practically viable for purchasing institutions. Part IV of the Handbook looks at the intersection of human rights (and international human rights law) with specialised areas of trade, investment and finance. Krajewski provides an overview of the relationship between trade agreements and human rights and addresses the question how potential conflicts between trade agreements and human rights agreements can

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From ‘business or human rights’ to ‘business and human rights’  17 be addressed under public international law. He discusses two tools that have been employed to mitigate adverse effects of trade agreements on human rights: human rights clauses in trade agreements, and human rights impact assessments of trade agreements. Krajewski also analyses other reform options which could mitigate negative effects of trade agreements on human rights, that is, reform of new trade agreements, and the role of the proposed legally binding BHR instrument. In their chapter, Coleman, Cordes and Johnson provide an overview of the interaction between international human rights law and the investment treaty regime. They highlight the challenges that arise from tension between international human rights law and international investment law, including the impact of the investment regime on the ability of host states to regulate and on access to justice for investment-affected rights holders. The authors also explore how human rights issues have been addressed by the investment regime to date – both recent developments in treaty drafting practice and responses to human rights argumentation by investment tribunals – and outline options for further reform of the international investment regime. Bradlow and Fourie consider the primary sources of human rights obligations and responsibilities of multilateral development banks (MDBs), and then analyse selected independent accountability mechanism cases to draw some lessons about how the MDBs manage adverse human rights impacts of their operations. They argue that the MDB’s record in dealing with the adverse human rights impacts of their projects is mixed and that there are significant costs, both to MDBs and their borrowers, of failing to adequately address these impacts. Since the MDBs’ projects are similar to those undertaken by private financial institutions and contractors, understanding how the MDBs deal with human rights issues related to their operations can help deepen our understanding of the human rights responsibilities of these other actors. Part VI of the Handbook gives dedicated attention to business-related heightened human rights risks faced by certain groups of people or arising because of the operating context. Černič investigates business responsibilities and obligations related to indigenous peoples’ human rights. Indigenous peoples are particularly vulnerable to issues related to land and correlated environmental and economic, social and cultural rights. Against this background, Černič examines existing and emerging corporate obligations regarding indigenous peoples’ human rights and explores legal and quasi-legal avenues for their enforcement. Kolieb studies the somewhat neglected BHR area of children’s rights in relation to business. After providing a historical overview of international children’s rights (including under the widely-ratified Convention on the Rights of the Child), he assesses the treatment of children’s rights by key BHR processes and instruments, including the UNGPs, and highlights some key child-rights issues impacted by business activities. The chapter also offers suggestions on how to mainstream children’s rights into the BHR discourse and continuously improve businesses’ respect and advancement of children’s rights. Van Ho analyses the business responsibility to respect human rights in ‘complex environments’, that is, in situations where there are widespread or systematic gross violations of international human rights law and serious violations of international humanitarian law. She examines the UNGP and scholarship on complex environments and then analyses pertinent findings from mechanisms engaged with ‘transitional justice’. Van Ho argues that lessons from ‘transitional justice’ mechanisms suggest that the overarching context of a complex environment may make it impossible for a business to comply with its responsibility to respect human rights, in that ‘mere presence’ on a territory can, in fact, mean the said business con-

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18  Research handbook on human rights and business tributing to widespread and systematic violations of international human rights law and international humanitarian law. In such circumstances, the only means to realise the responsibility to respect is to leave the context, but local companies may not have this luxury. She grapples with this dilemma and calls for greater engagement of BHR discussions with transitional justice experiences. Part VI of the Handbook focuses its attention on exploring opportunities and challenges concerning access to remedy and corporate accountability for business-related human rights abuses. Jägers looks at the role of information in ensuring access to effective remedies. She argues that the right to information can be considered a ‘gateway-right’: the lack of information on complex and opaque operational structures can make it difficult for victims of corporate human rights abuse to start legal proceedings against a multinational corporation. Against this background, Jägers explores the contours of the right to information under international human rights law and proposes a way forward to address the information disparities that hinder access to effective remedy in the BHR field. Birchall reviews the role of CSOs and human rights defenders in ensuring corporate accountability. He discusses a wide variety of tactics used by CSOs (from engagement in multi-stakeholder regulation and intra-corporate consultancy and collaboration, through to exposing wrongdoing and organising protests) as well as some of the tactics used by businesses to weaken civil society participation. Birchall concludes with a discussion of the rationales and possibilities for more positive engagement by businesses in protecting the protectors of human rights as a matter of urgency. Mares grapples with a critical question in his chapter: whether and under what conditions a parent company might be held accountable for human rights abuses in their global operations, including harms inflicted by its subsidiaries’ operations. He reviews the current situation as well as recent developments in terms of both law (company law, tort law, and other regulatory areas) and policy (soft law and national action plans on BHR). Mares argues that the emerging picture is one of stability: the resilience of the principle of legal separation over almost two centuries is remarkable, despite some notable developments. He examines options for regulatory reform but also puts them into perspective by explaining the resilience of the principle and its deep ramifications. Van Huijstee and Wilde-Ramsing assess whether and to what extent non-judicial grievance mechanisms (NJGMs) can, should and do provide effective access to remedy for victims of business-related human rights abuses. After analysing the existing body of literature on NJGMs and mapping out the patchwork of NJGMs that currently exists, they discuss the available data on the actual performance of NJGMs and conclude that the performance of NJGMs in providing remedy is poor. Van Huijstee and Wilde-Ramsing recommend additional research into the effectiveness of NJGMs and suggest that the design of NJGMs needs to be improved so that they are better equipped to provide effective access to remedy for victims of business-related human rights abuse. Cantú Rivera analyses the role of National Human Rights Institutions (NHRIs), including in providing adequate access to non-judicial remedy for victims, in the context of the international human right framework. He looks at a few case studies that reveal both possibilities and limits of NHRIs in fulfilling this expectation. Cantú Rivera concludes by considering the role given to NHRIs in the optional protocol to the proposed legally binding BHR instrument. Kyriakakis considers the value of international criminal law for victims’ right to access effective remedies in cases involving atrocity, despite limits to the extent to which interna-

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From ‘business or human rights’ to ‘business and human rights’  19 tional criminal law mechanisms can redress corporate human rights violation. She analyses what Pillar III of the UNGPs expects from criminal law in relation to access to remedy. Kyriakakis then explores the potential of international criminal law as a victim redress tool, taking into account recent developments within the field towards a more victim-centric approach, including the growing emphasis on victim reparations within international criminal institutions. She argues that international criminal law is a necessary, if only partial, part of the story for pursuing Pillar III objectives.

5.

WHAT THE RESEARCH HANDBOOK DOES NOT COVER

In this final section, let me briefly outline what this Research Handbook does not cover. Considering the ever-expanding scope of BHR, there is hardly anything which does not have a connection to BHR – from rights to remedies, from trade to tax evasion, from pollution to privacy, from investment to artificial intelligence, from subsidiaries to supply chains, from disclosure to due diligence, from conflicts to climate change, from civil society to children, from public procurement to pollution, from finance to fishing, from gender to genetically-modified crops, from slavery to sustainability, from internet to indigenous peoples, from media to migration, from poverty to prisons, and from development to defenders. Hence, it was almost impossible for this Handbook (or any Handbook for that matter) to capture everything, or even all the key BHR topics. There are certain issues which the editors had envisaged covering in the Handbook, but for one reason or another this did not happen. In terms of regulatory initiatives attempted, tried or tested so far, the Handbook focuses on two specifically: the ATS and the UNGPs. However, there is an ever-growing regulatory forest that deserves critical analysis. Apart from reviewing the contribution made by initiatives which could not be adopted (UN Code of Conduct for Transnational Corporations and the Draft Norms), it is desirable to assess the potential as well as the limits of the Global Compact, the OECD Guidelines on Multinational Enterprises and the ILO Tripartite Declaration in the post-UNGPs period. The same could be said about the proposed treaty,70 mandatory human rights due legislation emerging in Europe,71 and numerous multi-stakeholder initiatives in the BHR field.72 Readers of the Handbook can take solace in the fact that hardly any of the regulatory initiatives not discussed here have been able to trigger significant changes in how corporations are run. There are isolated patches of success in various regulatory initiatives being able to ensure that businesses respect human rights. Such patches are rarer in the domain of corporate accountability for human rights abuses: even promising court judgments in cases such as Vedanta v Lungowe and Nevsun v Araya do not automatically provide remedy to the affected

70 See ‘Open-Ended Intergovernmental Working Group on Transnational Corporations and Other Business Enterprises with Respect to Human Rights’, www​ .ohchr​ .org/​ EN/​ HRBodies/​ HRC/​ WGTransCorp/​Pages/​IGWGOnTNC​.aspx (last accessed 5 October 2019). 71 See BHRRC, ‘Mandatory Due Diligence’, www​.business​-humanrights​.org/​en/​mandatory​-due​ -diligence (last accessed 5 October 2019). 72 See MSI Database, https://​msi​-database​.org/​database (last accessed 5 October 2019).

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20  Research handbook on human rights and business individuals and communities;73 rather, they merely open a window for them to take a shot at seeking remedies. Rightsholders are not a homogenous group and business activities affect – both positively and negatively – individuals and communities differently. Out of many such situations,74 three concrete examples can be offered to illustrate this point: the impacts on indigenous peoples, children and women. As many natural resources are found in areas which have been inhabited by indigenous peoples for centuries, the extraction of these resources without their ‘free, prior and informed consent’ results in benefits for others but mostly harm – often irreversible – to indigenous peoples. Similarly, states as well as companies have not yet given serious thought to differentiated impacts on women and children.75 For example, despite knowing that more than 70 per cent of modern slavery victims are women and girls, anti-slavery legislation enacted by the UK and Australia does not take any cognisance of this important fact.76 This Handbook grapples with the unique situation of indigenous peoples and children. I was hoping to write a chapter on the gender dimensions of BHR, but could not do so given other commitments. However, I would strongly encourage readers to read the UN Working Group on Business and Human Rights’ report that I wrote to expound the gender dimensions of the UNGPs:77 the report not only develops a three-step gender framework,78 but also provides specifics guidance for all 31 Principles of the UNGPs. I very much hope that this report will play a role in addressing the current gender-neutral approach in the BHR field. While we have not been able to resolve major challenges in the BHR field that have been with us for decades (for example, the liability of a parent company for its subsidiary’s conduct, workers’ exploitation in supply chains, or an efficient system of providing effective remedies, especially in transnational cases), newer challenges are emerging which deserve closer scholarly attention.79 The role of social media companies in interfering with democratic processes, spreading fake news, triggering serious crimes and misappropriating users’ data is a case in point. At the same time, how new technologies that underpin the Fourth Industrial Revolution – such as automation, artificial intelligence and biotechnology – will affect human rights adversely and what businesses should do to avert such effects are yet to be understood fully.

[2019] UKSC 20; 2020 SCC 5. The impact of business activities is different and often disproportionate, for example, for migrants, internally displaced people, people with disabilities and persons of different sexual orientation. 75 In terms of standards for children, see Committee on the Rights of the Child, ‘General comment No. 16 (2013) on State obligations regarding the impact of the business sector on children’s rights’ CRC/C/ GC/16; ‘Children’s Rights and Business Principles’, https://​childrenandbusiness​.org/​(last accessed 5 October 2019). For women, see the Women’s Empowerment Principles, www​.empowerwomen​.org/​en/​ weps/​about (last accessed 5 October 2019). 76 Surya Deva, ‘Slavery and Gender-Blind Regulatory Response’, Cambridge Core blog (8 March 2019), http://​blog​.journals​.cambridge​.org/​2019/​03/​08/​slavery​-and​-gender​-blind​-regulatory​-responses/​ (last accessed 5 October 2019). 77 UN Working Group on Business and Human Rights, ‘Gender dimensions of the Guiding Principles on Business and Human Rights’, A/HRC/41/43 (23 May 2019), https://​ap​.ohchr​.org/​documents/​dpage​_e​ .aspx​?si​=​A/​HRC/​41/​43 (last accessed 5 October 2019). 78 The three steps are gender-responsive assessment, gender-transformative measures, and gender-transformative remedies. Ibid, 11. 79 See Surya Deva et al, ‘Business and Human Rights Scholarship: Past Trends and Future Directions’ (2019) 4:2 Business and Human Rights Journal 201. 73 74

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From ‘business or human rights’ to ‘business and human rights’  21 Similarly, the jury is still out as to whether existing BHR standards would be able to deal adequately with special aspects concerning climate change. While the human rights connections to climate change are clear and compelling, more clarity is required as to the individual responsibility of each business and what accountability would look like for business enterprises not mitigating adverse impacts on climate. Although this Handbook does not deal with such emerging challenges in the BHR field, I hope that other such volumes will fill this gap in the future.

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2. The history of ‘business and human rights’ and its relationship with corporate social responsibility Florian Wettstein

1. INTRODUCTION Is business and human rights (BHR) a subset of the broader corporate social responsibility (CSR) field, or even a ‘CSR issue’? Observation of current trends in organizing human rights responsibilities in business practice may suggest that at least companies and business professionals seem to think so.1 More generally, with the BHR discussion maturing and CSR increasingly embracing the discussion after the publication of the UNGPs in 2011, there is a tendency today to interpret BHR as a part of broader CSR approaches. Some may even see the two discussions as one and the same. However, a closer look at the history of both discussions shows that the relationship between CSR and BHR is more complex. Despite overlaps and intersections between the two debates, BHR has emerged and evolved largely separate and in parallel to the broader CSR debate.2 Against this background, the depiction of BHR as a CSR issue seems anachronistic at best and, as this chapter will show, as a deliberate political misrepresentation at worst. Rather than as a subset or an issue of CSR, or as a seamless and ‘harmonic’ complement to CSR, BHR should be viewed as a critical response to it. The attempt to ‘domesticate’3 BHR into existing CSR approaches (CSR practice) and current CSR thinking (CSR theory) may seem like a boost to the profile of BHR, at least on the surface. However, it may have the opposite effect down the road and come to undermine BHR at its very core. Thus, a CSR mindset has the potential to be obstructive and undermine rather than further advancements in BHR – this holds both at the corporate and the policy levels. Granted, CSR research has opened up in recent years and newer approaches such as ‘political CSR’ have emerged with explicit reference to ‘governance gaps’, weak institutions or conflict, thus with significant overlap with BHR; however, the ‘typical’ CSR lens still differs fundamentally from BHR in terms of its outlook on how to cope with such global realities. Thus, the aim of this chapter is to show that while on the surface the two movements seem similar, compatible or complementary in promoting responsible business conduct, at a more fundamental level CSR

1 See, e.g., Louise J Obara and Ken Peattie, ‘Bridging the Great Divide? Making Sense of the Human Rights–CSR Relationship in UK Multinational Companies’ (2018) 53/6 JWB 781; Louise J Obara, ‘“What Does This Mean?”: How UK Companies Make Sense of Human Rights’ (2017) 2/2 BHRJ 249. 2 Florian Wettstein, ‘CSR and the Debate on Business and Human Rights: Bridging the Great Divide’ (2012) 22/4 BEQ 739. 3 Ioana Tuta, Created and Lost in Translation: The Corporate Management of Human Rights (PhD Thesis, Graduate Institute, Geneva 2017).

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24  Research handbook on human rights and business may, in fact, be counter-productive to the BHR agenda. This argument shall be developed step by step, by reflecting on the basic underlying assumptions of both movements and showing how the differences between the two translate into concrete manifestations and instances of CSR being instrumentalized in direct opposition to advancements in the BHR space. The argument proceeds in three steps. First, I will trace the historical evolution of the BHR movement from its origins to its current institutionalization in policy, in practice and as an academic field. Rather than providing a comprehensive historical account, I will outline some of the major historic milestones of the BHR debate. I will interpret milestones broadly, consisting of key events, developments, institutions and players contributing to the evolution of the debate. The second step will consist of outlining the main conceptual and practical differences between BHR and CSR. More specifically, I will substantiate the view of BHR as a critique of CSR and elaborate on CSR’s potential to slow rather than to bolster and support current progress in BHR. This second step will be informed by the historical insights in the first part. In the third step, I will draw some conclusions and implications from the first two. Specifically, I will briefly outline and assess three different scenarios for the future of BHR.

2.

HISTORICAL EVOLUTION OF THE BHR DEBATE

Similar to the study of other social movements, the answer to the question of what belongs to the history of BHR is: ‘it depends.’ It depends, for example, on what one considers to be a part of the broader BHR field. For example, is the more general discussion on corporate responsibility sufficiently intertwined with or providing an essential basis for the BHR field and thus ought to be considered an inevitable part of its history? Or should we consider it a separate and independent discussion, which is related to, but not an integral part of a historical account of BHR? To what extent does the use of language and terminology predetermine the classification of certain issues as belonging to the BHR discussion? For example, are human rights issues a part of the BHR discussion even if businesses or even scholarship do not explicitly address them in human rights terms? Or does the absence of human rights terminology disqualify them from being included in a historical account of BHR? Finally, it depends on what one is interested in: in BHR as a broad social movement, in its institutionalization in the global political and governance arena, or in its evolution as an academic field. Thus, any historical account of BHR – and of any field of practice and theory in general – is influenced decisively by the perspective and outlook of the author. The following paragraphs are no different in this regard. I will structure my short historical overview in three ‘waves’ of developments: first, the ‘precursors’ of the BHR discussion; second, the ‘formative years’; and finally, the ‘maturing’ of the debate. In each of the three waves I will touch on the broader social movement, the institutional evolution and the academic discussion on business and human rights. 2.1

Precursors: 1970–1995

It is commonly agreed that the events unfolding in the mid-1990s around the execution of Nigerian playwright and activist Ken Saro-Wiwa mark something like the beginning of the

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The history of BHR and its relationship with CSR  25 BHR movement in a more narrow sense.4 Ken Saro-Wiwa spearheaded large-scale protests against the massive destruction of the environment in Nigeria’s Niger Delta and the erosion of the livelihoods of tens of thousands of local Ogoni people by Western oil companies since the 1970s. However, this common interpretation of the BHR movement’s starting point perceives the movement as relevant only once it reaches international scale in the 1990s, rather than locating its beginnings in the local protests by the Ogoni people back in the 1970s. Thus, Ken Saro-Wiwa’s death and the ensuing international protests perhaps mark the starting point of a more coordinated international movement and discussion on BHR, or indeed of the emergence of a broad concern regarding companies’ human rights conduct in the North. However, more fragmented, contextualized local movements emanating from the Global South itself may have existed much earlier, though of course under different, if any, labels. Similarly, the controversial engagement of corporations with the South African apartheid regime throughout the 1970s and 1980s is rarely seen as a starting point, or even as a part of, the core BHR discussion, even though it inspired some of the early and seminal contributions to the academic literature in the BHR field later on (for example, Donaldson).5 While many Western companies in South Africa complied with and bought into the discriminatory apartheid laws and policies, others, under the leadership of the Baptist minister and GM board member Leon Sullivan, opposed the illegitimate laws and eventually pulled out of South Africa. Albeit that this movement coalesced around notions of racism and race discrimination, rather than human rights more generally, the issue at hand was quintessentially a BHR issue; companies operated in complicity with the human rights violating government simply by complying with its laws and policies.6 The emergence of the BHR movement – or, depending on the perspective, its precursors and antecedents – around that time is no coincidence. It was the result of an accelerating globalization process and the rise – in number, size and significance – of the modern multinational corporation on the one hand, and the perception of decreasing governmental control over this process on the other. John Ruggie,7 and later BHR literature more generally,8 have spoken of so-called governance gaps as the root cause of the ‘human rights predicament’ in this regard. This process coincided with what Santoro perceives as increasing frustration on the part of human rights advocates over the lack of state accountability, and thus an opportunity for them to shift their attention to business as a potentially more responsive target of human rights campaigns.9

4 Geoffrey Chandler, ‘The Evolution of the Business and Human Rights Debate’ in Rory Sullivan (ed), Business and Human Rights: Dilemmas and Solutions (Greenleaf Publishing 2003) 22; Florian Wettstein, ‘CSR and the Debate on Business and Human Rights: Bridging the Great Divide’ (2012) 22/4 BEQ 739. 5 Thomas Donaldson, The Ethics of International Business (OUP 1989). 6 Michael A Santoro, ‘Sullivan Principles or Ruggie Principles? Applying the Fair Share Theory to Determine the Extent and Limits of Business Responsibility for Human Rights’ (2012) XXVIII/106 Notizie di Politeia 171. 7 John G Ruggie, Just Business: Multinational Corporations and Human Rights (WW Norton & Company 2013). 8 Penelope Simons and Audrey Macklin, The Governance Gap: Extractive Industries, Human Rights, and the Home State Advantage (Routledge 2014). 9 Michael A Santoro, ‘Business and Human Rights in Historical Perspective’ (2015) 14/2 JHR 155, 156.

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26  Research handbook on human rights and business It is not a coincidence that early attempts to establish and institutionalize corporate human rights responsibility reach back to the 1970s as well. The UN started an early attempt to regulate the investment activities of multinational corporations in the 1970s. In response to developing nations’ increasing concern regarding the rising power of multinational companies, the UN created a new Center on Transnational Corporations in 1974, whose main task was to devise a comprehensive code of conduct for multinational corporations.10 Among other things, the draft code asked multinationals to ‘respect human rights and fundamental freedoms in the countries in which they operate’, to foster equal opportunity and treatment and to abstain from any kind of discrimination. However, facing opposition from Western governments and from multinational corporations themselves, the draft code project was abandoned and the Center dissolved some two decades later. Around the same time, in 1976, the OECD launched its well-known OECD Guidelines for Multinational Enterprises. Designed as a voluntary alternative addressing states rather than corporations directly, it proved more viable than the UN’s binding approach. This first iteration of the OECD Guidelines too contained one lone paragraph on the human rights responsibilities of corporations, which over the years developed into a major section aligned with the UN Guiding Principles on Business and Human Rights (UNGPs) after 2011.11 While not legally binding, the OECD Guidelines do contain a soft enforcement mechanism based on the so-called National Contact Points (NCPs). After aligning the OECD Guidelines with the UNGPs, the NCPs are gaining increasing significance in the struggle for accountability within the broader BHR movement today. Lastly, the above mentioned operations of Western companies in apartheid South Africa prompted Leon Sullivan to form a coalition of businesses around what are now known as the ‘Sullivan Principles’ – a number of norms asking businesses to exercise civil disobedience, to engage in the active dismantling of the apartheid regime and ultimately to pull out of South Africa. While human rights language was not explicitly used in the Sullivan Principles, today they are not looked at as a broader CSR initiative, but commonly referenced in a more narrow BHR context.12 The devastating consequences of existing governance gaps came to the fore perhaps most strikingly in the Bhopal gas disaster in 1984. On 3 December 1984 a gas leak in a factory of Union Carbide India Ltd., which was owned by the American-based company Union Carbide Corporation at the time, released 47 tons of the highly toxic methyl isocyanate gas into the night air of the densely populated Bhopal area. The incident, in which several thousand people lost their lives and hundreds of thousands of others were left with lasting health damage, counts as the largest industrial disaster in history. It was followed by a decades long struggle for justice by victims and their families, which continues to this day. More than three decades 10 Anita Ramasastry, ‘Closing the Governance Gap in the Business and Human Rights Arena: Lessons from the Anti-Corruption Movement’ in Surya Deva and David Bilchitz (eds), Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect? (CUP 2013) 162. 11 John G Ruggie, Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework (A/HRC/17/31, 2011) accessed 2 March 2020. 12 Michael A Santoro, ‘Sullivan Principles or Ruggie Principles? Applying the Fair Share Theory to Determine the Extent and Limits of Business Responsibility for Human Rights’ (2012) XXVIII/106 Notizie di Politeia 171; Florian Wettstein, ‘Waiting for the Mountain to Move: The Role of Multinational Corporations in the Quest for Global Justice’ (2013) XXIX/111 Notizie di Politeia 13.

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The history of BHR and its relationship with CSR  27 later, victims have still not been fully compensated, and those responsible have still not been punished.13 The Bhopal gas disaster has become a historical hallmark for the modern business and human rights movement, a frequently raised reminder of the real and often insurmountable obstacles which multinational corporate structures pose to corporate accountability, even in the most blatant and devastating cases of corporate abuse. Tellingly, it was precisely the Bhopal tragedy and the context of businesses operating in apartheid South Africa that triggered some of the first business and human rights-specific academic contributions both in law and non-law. Upendra Baxi’s early writing on the Bhopal disaster provided some important legal groundwork for the exploration of corporate impunity for human rights violations.14 Tom Donaldson’s seminal Ethics of International Business was one of the first non-law academic works on corporate responsibility referring directly to human rights in a foundational sense.15 The book was influenced, if not inspired, by the events unfolding in South Africa at that time. A number of other contributions on the intersection of business and human rights followed,16 but scholarly research on BHR more generally remained scant and isolated throughout the 1970s and 1980s, and only started to gain more traction towards the end of the 1990s.17 2.2

The Formative Years: 1995–2011

The big push for a more forceful and systematic international movement on BHR happened in the mid- to late-1990s. In the aftermath of Ken Saro-Wiwa’s killing, prominent human rights NGOs started to publish high profile reports on the complicity of Western companies with rights-violating regimes in the South.18 Increasingly, they built capacity and expertise and some launched specific teams and divisions with a special focus on BHR, such as the Amnesty International Business Group in the UK, which had a lasting impact in shaping the early debate. The 2002 launch of the Business and Human Rights Resource Centre (BHRRC) by Chris Avery marked another critical milestone in the institutionalization of the movement. BHRRC would later become the most important information hub and thematic news source for the BHR field.

See Upendra Baxi, ‘Human Rights Responsibility of Multinational Corporations, Political Ecology of Injustice: Learning from Bhopal Thirty Plus?’ (2016) 1/1 BHRJ 21. 14 See, e.g., Upendra Baxi, ‘From Human Rights to the Right to Become Human: Some Heresies’ (1986) 13 India International Journal 185; Upendra Baxi (ed), Inconvenient Forum and Convenient Catastrophe: The Bhopal Case (NM Tripathi Pvt Ltd 1986); Upendra Baxi and Thomas Paul (eds), Mass Disasters and Multinational Liability: The Bhopal Case (NM Tripathi Pvt Ltd 1986); and Upendra Baxi and Amita Dhanda (eds), Valiant Victims and Lethal Litigation: The Bhopal Case (NM Tripathi Pvt Ltd 1990). 15 Thomas Donaldson, The Ethics of International Business (OUP 1989). 16 George G Brenkert, ‘Can We Afford International Human Rights?’ (1992) 11/7 JBE 515. 17 Barbara A Frey, ‘The Legal and Ethical Responsibilities of Transnational Corporations in the Protection of International Human Rights’ (1997) 6 Minnesota Journal of Global Trade 153; Michael Addo (ed), Human Rights Standards and the Responsibility of Transnational Corporations (Kluwer Law International 1999). 18 Human Rights Watch, The Enron Corporation: Corporate Complicity in Human Rights Violations (Human Rights Watch 1999); Human Rights Watch, The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria’s Oil Producing Communities (Human Rights Watch 1999). 13

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28  Research handbook on human rights and business At the same time, judicial developments, particularly in the US, paved the way to bring lawsuits against corporations violating human rights in their foreign operations and some high profile ‘pilot’ cases involving prominent companies like Chiquita, Unocal or Shell brought further attention to the BHR concern during the mid- to late-1990s and early 2000s. Both NGO campaigns and the increasing risk of human rights litigation have played important roles in compelling companies to start to adopt explicit human rights policies, sign up to and participate in voluntary multi-stakeholder initiatives, or address human rights in their sustainability or CSR reporting.19 In the year 2000, then Secretary General of the United Nations, Kofi Annan, launched the UN Global Compact, which, with a view to the number of signatory companies, is often seen as the most successful international soft-law initiative for sustainable business. While the impact of the initiative on corporate conduct is increasingly questioned,20 it had an important signalling effect for the broader BHR movement. Not only was the UN ready and willing to engage businesses on their social and environmental impacts – a move that was both hailed and criticized – but it also recognized corporations’ relevance for the broader human rights movement and, importantly, their significance for human rights beyond employment and labour relations.21 The UN Global Compact was the first global code of major significance that put corporate human rights responsibility at its very core. This makes the UN Global Compact a key initiative in the historic development of the BHR discussion. However, its historic role has changed over time. While during its founding years it was a symbol of what many hoped would be the beginning of a transformation of the global economy, over the years it has turned into its opposite: a strategic tool to counter and combat efforts aimed at the establishment of more far-reaching and binding accountability mechanisms for businesses operating in the global markets. It has become a common strategy for businesses and business associations to point to their voluntary adherence to the UN Global Compact as an argument for why stronger, binding regulation on corporate responsibility is unnecessary or even counter-productive. We will dwell on this thought further down in regard to the ambiguous role of CSR in moving the BHR agenda forward. Around the very same time, in 1998, the UN Sub-Commission on Human Rights launched an initiative, which was similar to the UN Global Compact in terms of its hopes and ideals, but altogether different in the way it tried to promote them. The Sub-Commission initiated the drafting of the ‘Norms on the Responsibility of Transnational Corporations and Other Business Enterprises with Regard to Human Rights’ (UN Draft Norms) by a working group led by University of Minnesota law professor David Weissbrodt; in stark contrast to the UN Global Compact, these norms were meant to build the basis of what was to become a legally binding global framework on corporate human rights responsibility.22 Being confronted with the same opposition as the earlier draft code attempt and now going up against the innovative Judith Schrempf-Stirling and Florian Wettstein, ‘Beyond Guilty Verdicts: Human Rights Litigation and Its Impact on Corporations’ Human Rights Policies’ (2017) 145 JBE 545. 20 S Prakash Sethi and Donald H Schepers, ‘United Nations Global Compact: The Promise– Performance Gap’ (2014) 122 JBE 193. 21 Florian Wettstein, ‘CSR and the Debate on Business and Human Rights: Bridging the Great Divide’ (2012) 22/4 BEQ 739. 22 David Weissbrodt and Muria Kruger, ‘Norms on the Responsibilities of Transnational Corporations and other Business Enterprises with Regard to Human Rights’ (2003) 97 AJIL 901; David Weissbrodt, ‘Corporate Human Rights Responsibilities’ (2005) 6/3 zfwu 279. 19

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The history of BHR and its relationship with CSR  29 and highly successful UN Global Compact, the UN Draft Norms faced an uphill battle, which they were destined to lose. Concordantly, also this renewed attempt for a binding solution was shelved in 2003 and buried two years later, when John Ruggie took over as UN Special Representative to the Secretary General (SRSG) – a move which is now widely known as ‘Normicide’. The UN Draft Norms were perhaps the first comprehensive BHR initiative at a global level. While the UN Global Compact put human rights centre stage, it was always meant to be an initiative in the spirit of CSR: broader in its scope and focus and non-binding in its nature and approach. The UN Draft Norms, on the other hand, were designed to address corporate human rights responsibility in an exclusive manner and by means of international law. The contest between these two initiatives within the very same organization can be seen as almost paradigmatic of how the BHR discussion would play out over the coming years. That is, it modelled the oscillation between binding and non-binding initiatives and drew lines between supporting and opposing stakeholder groups. Furthermore, it foreshadowed CSR’s shift from a more facilitating to a more obstructive role for the BHR movement. In the heyday of neoliberal globalization, the obstacles in the way of a binding framework for corporate human rights obligations proved too great to overcome. However, the intensity of debate that led up to the failure of the UN Draft Norms also showed a need to move the debate forward by other means. Enter John Ruggie, who was appointed to the newly created position of SRSG in 2005. Over the course of six years the SRSG developed a set of guiding principles for both governments and companies that outline their basic responsibilities in regard to human rights. Companies have a responsibility to respect – that is, not to violate – human rights, which is rooted not in law, but in social expectations. States, on the other hand, have a duty to protect human rights, which directly derives from international human rights law. In addition, both states and businesses ought to help improve access to remedy for the victims of corporate human rights violations, within the limits of their respective responsibilities. The UNGPs were unanimously endorsed by the UN Human Rights Council and went into force in June 2011. Not creating any binding norms on businesses and lacking an explicit enforcement regime, the UNGPs were widely criticized for catering too much to business interests while neglecting the pleas of those affected by adverse impacts of corporate activity.23 However, by addressing both states and corporations and receiving widespread endorsement from both groups, the UNGPs did raise the bar and the expectations based on which civil society organizations were able to launch more demanding and more focused campaigns to improve global and domestic infrastructures to hold companies accountable for their human rights conduct. In the academic space, it was initially legal scholars who kick-started an actual debate on BHR in the late 1990s and early 2000s. Thus, historically, BHR is not a field that sprang from the more established discussion on CSR; rather it emanated from legal discussions on international human rights law. This is not a coincidence; the very real struggle of victims of corporations’ human rights abuse has been crucially about legal redress and access to justice from the start. Thus, driven by the quest for accountability of corporations implicated with human rights abuse, academic lawyers, particularly those focusing on matters concerning international law, began to look into and conceptualize the relation between companies and Surya Deva, ‘Treating Human Rights Lightly: A Critique of the Consensus Rhetoric and the Language Employed by the Guiding Principles’ in Surya Deva and David Bilchitz (eds), Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect? (CUP 2013) 78. 23

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30  Research handbook on human rights and business international human rights law. As a consequence, the field has been heavily law-driven and thus dominated by legal scholars ever since. A large part of the early academic discussion was preoccupied with the fundamental question whether or not international law provided sufficient grounds from which to derive corporate human rights obligations and what it would take to make such an argument.24 Only with the publication of the SRSG’s ‘Protect, Respect, and Remedy Framework’,25 which provided the conceptual basis for the subsequent UNGPs, did the discussion begin both to broaden in terms of interdisciplinarity and narrow in terms of its focus. While international legal scholars have remained the dominant force in the academic discussion to this day, the field became more interdisciplinary around that time, attracting contributions from various related fields such as CSR, business ethics and international relations. 2.3

The Maturing of the Debate: 2011–Ongoing

The publication of the UNGPs in June 2011 marked the end of the mandate of the SRSG and the beginning of the third wave in our history of BHR. While all eyes were on the mandate of the SRSG between 2005 and 2011 and on the UNGPs in the years after their publication, this third wave has brought developments that will likely end up being of more momentous significance for the future of the BHR movement. This is not to diminish the importance of the work of the SRSG, and of the UNGPs; to the contrary, the SRSG provided the groundwork that made these developments possible – or even only thinkable – to begin with. In the following paragraphs, I will briefly touch on some of the central developments at the global, regional and domestic levels. After John Ruggie stepped down as the SRSG, his mandate was replaced by a UN Working Group on BHR (UNWG), which was tasked with supporting and advancing the dissemination and implementation process of the UNGPs. Importantly, the UNWG convenes the annual UN Forum on BHR in Geneva, which brings together around 2500 BHR professionals from government, practice, civil society and academia every year and has become a key fixture in the maturing BHR discussion. Furthermore, a plethora of BHR-specific organizations emerged in the civil society space, from those fulfilling more classic thinktank functions (such as the Institute for Human Rights and Business in London) to more practical consulting services around the implementation of the UNGPs (such as the New York-based Shift). However, it did not take long for the pendulum to swing back once more to a push for more binding attempts to regulate the human rights conduct of companies. With the implementation phase of the UNGPs in full swing, the governments of Ecuador and South Africa launched a successful new attempt to start negotiations on a binding instrument (treaty) on BHR at the UN level. After their resolution was passed by the UN Human Rights Council, an open-ended intergov-

Barbara A Frey, ‘The Legal and Ethical Responsibilities of Transnational Corporations in the Protection of International Human Rights’ (1997) 6 Minnesota Journal of Global Trade 153; Steven R Ratner, ‘Corporations and Human Rights: A Theory of Legal Responsibility’ (2001) 111/3 Yale Law Journal 443; Peter Muchlinski, ‘Human Rights and Multinationals: Is There a Problem?’ (2001) 77/1 International Affairs 31. 25 John G Ruggie, Protect Respect and Remedy: A Framework for Business and Human Rights (A/ HRC/8/5, 2008) accessed 2 March 2020. 24

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The history of BHR and its relationship with CSR  31 ernmental working group was put in place; treaty discussions started in 2015 and are ongoing at the time of writing this chapter.26 Treaty discussions at the UN level have become more concrete and tangible recently, but the most momentous and impactful developments at least in the short and medium term are currently happening at the domestic and regional levels. A number of states have released so-called National Action Plans (NAPs) on BHR and many more are in the process of doing so or have considered first steps in that direction.27 NAPs can be seen as a commitment of governments to fostering and advancing business respect for human rights by means outlined in the plans. However, as of yet, the published NAPs by and large remain rather vague and non-committal; they are reluctant to propose the introduction of any new binding measures and tend to focus more on past actions than on future commitments.28 On the up side, they do reflect increasing significance of the BHR issue in the policy agendas of national governments, and their general commitment to move the BHR discussion forward. Despite the reluctance reflected in most NAPs, the topic of BHR has seen significant developments also in the legislative arena, both domestic and regional. A number of countries have adopted landmark legislation in the BHR space in recent years. Perhaps most significantly, France passed a ground-breaking Duty of Vigilance Law that renders conducting human rights due diligence mandatory for the largest companies in the country.29 The Netherlands has passed a similar law, but limited to the issue of child labour, while the UK has set a precedent for other countries with its UK Modern Slavery Act, that is, a mandatory reporting scheme aimed at rooting out trafficking and modern slavery. The US, as part of its Dodd–Frank Act, has established mandatory due diligence in connection with the import of conflict minerals; a similar provision was recently adopted also by the European Union. This development has not come without setbacks, however. Most momentous among them are two recent decisions by the US Supreme Court on Kiobel v Shell in 2013 and Jesner v Arab Bank in 2018, respectively. In Kiobel v Shell, the US Supreme Court established a presumption against the extraterritorial application of the Alien Tort Claims Act (ATCA) and thus raised the threshold to bring cases to US courts significantly. In Jesner v Arab Bank, the US Supreme Court set out to deliberate the question of whether ATCA ought to apply to corporations altogether. The Supreme Court did not answer this momentous question fully in the end, but it limited the scope and reach of ATCA once again by putting a blanket ban on all lawsuits against non-US 26 The openended intergovernmental working group met in October 2018 for their fourth session of deliberations. The main focus of the fourth session was the zero draft of the treaty, which was released in July 2018. For a summary of the first three sessions of the openended working group see Carlos Lopez and Ben Shea, ‘Negotiating a Treaty on Business and Human Rights: A Review of the First Intergovernmental Session’ (2016) 1/1 BHRJ 111; Carlos Lopez, ‘Struggling to Take Off? The Second Session of Intergovernmental Negotiations on a Treaty on Business and Human Rights’ (2017) 2/2 BHRJ 365; Doug Cassel, ‘The Third Session of the UN Intergovernmental Working Group on a Business and Human Rights Treaty’ (2018) 3/2 BHRJ 277. 27 Claire Methven O’Brien, Amol Mehra, Sara Blackwell and Cathrine Bloch Poulsen-Hansen, ‘National Action Plans: Current Status and Future Prospects for a New Business and Human Rights Governance Tool’ (2016) 1/1 BHRJ 117. 28 ICAR, ECCJ, Dejusticia, Assessment of Existing National Action Plans (NAPs) on Business and Human Rights (2017) accessed 27 October 2017. 29 See, e.g., Sandra Cossart, Jérôme Chaplier and Tiphaine Beau De Lomenie, ‘The French Law on Duty of Care: A Historic Step Towards Making Globalization Work for All’ (2017) 2/2 BHRJ 317.

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32  Research handbook on human rights and business companies. Nevertheless, a variety of different initiatives to bolster and improve home-state solutions are underway or currently under discussion in a number of other countries and it is to be expected that this discussion will evolve significantly in the near future. At the regional level, the European Union, despite its rather obstructive role in the treaty negotiations, has been a more progressive force in pushing the BHR agenda, particularly by continuously expanding a regime of binding legislation around the topic. Most importantly, its non-financial reporting directive will mandate large corporations of more than 500 employees to report on how they manage social and environmental challenges across the EU.30 As of 2018, such companies have been required to include non-financial statements in their annual reports; this includes a requirement to report on the policy and implementation of human rights respect. As mentioned above, a second piece of landmark regulation is the EU regulation on conflict minerals, which will come into force fully in 2021.31 It resembles the respective provision in the Dodd–Frank Act in large part, but includes all companies rather than only publicly traded ones. The academic discussion on BHR has not only grown significantly, both in terms of number of contributions and scholars involved, but has also made significant strides towards institutionalization as an academic field since the publication of the UNGPs. The foundation of dedicated business and human rights centres by universities (such as NYU Stern School of Business’s Center for Business and Human Rights) and the creation of designated faculty positions are concrete manifestations of this development. A number of journals launched special issues on the topic and increasingly there was a need and demand for a more dedicated publication platform for the emerging BHR field. This void was filled by the launch of the Business and Human Rights Journal in 2015, which aims at offering a platform to BHR scholars to speak to the whole of the interdisciplinary BHR community, rather than only to specific, disciplinary subsets thereof. The foundation of the Global Business and Human Rights Scholars Association in 2017 marks the latest step in the institutionalization of BHR as an academic field.

3.

BHR’S RELATION TO CSR

CSR is what Scherer and Palazzo call an ‘umbrella term’32 for a wide variety of initiatives and processes, which corporations put in place to make sure it meets social and moral expectations while pursuing its economic interests. As opposed to BHR’s clear focus on human rights issues, CSR has always been characterized by a much broader scope both in terms of issues addressed and in terms of instruments and initiatives used to address them. This is seen as both a strength and a weakness of CSR. Even early CSR scholars had a keen sense of the fuzziness of the concept: 30 Directive 2014/95/EU amending Directive 2013/34/EU as Regards Disclosure of Non-Financial and Diversity Information by Certain Large Undertakings and Groups [2014] accessed 2 March 2020. 31 See European Commission, ‘The Regulation Explained’ (European Commission, 13 December 2017) http://​ec​.europa​.eu/​trade/​policy/​in​-focus/​conflict​-minerals​-regulation/​regulation​-explained/​ acc-​ essed 11 September 2018. 32 Andreas G Scherer and Guido Palazzo, ‘Toward a Political Conception of Corporate Responsibility: Business and Society Seen from a Habermasian Perspective’ (2007) 32/4 AMR 1096, 1096.

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The history of BHR and its relationship with CSR  33 The term is a brilliant one; it means something, but not always the same thing, to everybody. To some it conveys the idea of legal responsibility or liability; to others, it means socially responsible behavior in an ethical sense; to still others, the meaning transmitted is that of ‘responsible for,’ in a causal mode; many simply equate it with a charitable contribution; some take it to mean socially conscious; many of those who embrace it most fervently see it as a mere synonym for ‘legitimacy,’ in the context of ‘belonging’ or being proper or valid; a few see it as a sort of fiduciary duty imposing higher standards of behavior on businessmen than on citizens at large.33

Thus, both CSR and BHR can be seen as a part of a broader movement interested in promoting and establishing corporate responsibility beyond profit-maximization and wealth creation. As such, at least at first glance, the two movements can be seen, if not as fully congruent, at least as compatible and complementary. From such a perspective, BHR could indeed be seen as an explication of a specific domain of CSR, that is, as a subset of CSR, or perhaps as an extension of CSR into a new issue area. However, the two debates have different starting points. BHR, as seen above, has a fairly short history, at least if we focus on the emergence of a systematic movement and discussion, rather than on the more scattered precursors of it. CSR, on the other hand, has been around for a little longer. Here too, manifestations of corporate responsibility are of course as old as the corporation itself. However, as a distinct concept and idea, CSR can be traced back to the 1950s and 1960s. The starting point of the academic discussion on CSR is often seen as Bowen’s seminal book The Social Responsibilities of the Businessman,34 but also instrumental in CSR’s formation period was the work of Keith Davis,35 Dow Votaw,36 Bill Frederick,37 and later Archie B Carroll.38 Still later, in the early to mid-1990s, CSR scholars started to focus more on the international context, studying how to frame and operationalize corporate responsibility in the context of accelerated globalization and ever more complex multinational structures of companies. This concern morphed into a specific new research stream called ‘political CSR’39 in the mid-2000s, whose influence increased significantly over the years up to today and which presents perhaps the most promising and plausible connecting point between the two debates. Strikingly, human rights did not feature prominently in this long history of the CSR discourse. It is not that a CSR focus completely eludes human rights issues; rather, where it does deal with issues concerning human rights, it has hardly used human rights terminology

33 Dow Votaw, ‘Genius Becomes Rare: A Comment on the Doctrine of Social Responsibility Pt. I’ (1972) 15/2 CMR 25, 25. 34 Howard R Bowen, The Social Responsibilities of the Businessman (Harper and Row 1953). 35 Keith Davis, ‘Can Business Afford to Ignore Corporate Social Responsibilities?’ (1960) 2 CMR 70. 36 Dow Votaw, ‘The Politics of a Changing Corporate Society’ (1961) 3/3 CMR 105; Dow Votaw, ‘Genius Becomes Rare: A Comment on the Doctrine of Social Responsibility Pt. I’ (1972) 15/2 CMR 25. 37 William C Frederick, ‘The Growing Concern over Business Responsibility’ (1960) 2/4 CMR 54. 38 Archie B Carroll (ed), Managing Corporate Social Responsibility (Little, Brown 1977). 39 Dirk Matten and Andrew Crane, ‘Corporate Citizenship: Toward an Extended Theoretical Conceptualization’ (2005) 30/1 AMR 166; Andreas G Scherer and Guido Palazzo, ‘Toward a Political Conception of Corporate Responsibility: Business and Society Seen from a Habermasian Perspective’ (2007) 32/4 AMR 1096; Pierre-Yves Néron, ‘Business and the Polis: What Does It Mean to See Corporations as Political Actors?’ (2010) 94 JBE 333.

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34  Research handbook on human rights and business to address them, at least as it pertains to the pre-UNGPs era.40 This holds both for academic articles and for most practical CSR initiatives and standards.41 As a consequence, contributions to the broader CSR discussion directly addressing and dealing with human rights remained scant and scattered until very recently.42 This is despite the thematic and conceptual closeness of some specific CSR discussions to the human rights perspective particularly since the 1990s, that is, since the widening of the CSR focus to a more international scope. For example, amid revelations of dismal labour conditions in factories owned by Nike and others in the developing world, a broader discussion on supply chain responsibility, and particularly on sweatshop and child labour, started to emerge within the CSR and business ethics fields.43 While remaining close to some of the BHR core concerns today, such discussions from the CSR and business ethics perspectives rarely adopted a specific human rights lens. Similarly, the more conceptual discussion on political CSR that coincidentally emerged precisely around the start of the Ruggie mandate in 2005, rarely adopted a human rights perspective. Thus, even in this most human rights-conducive research stream in the larger CSR field, human rights have for the most part remained conspicuously absent. Despite evident overlaps and shared assumptions with the BHR discussion – the view of governance gaps as a defining element for new corporate responsibilities; the rise of corporate power while states decrease in significance at the same time – there is even a latent and at times explicit scepticism towards universal ideals that informs political CSR and which has prevented it from seriously engaging with human rights responsibility so far. Thus, even though the emergence of BHR coincided temporally with such related discussions in the CSR field, it did not evolve as a logical extension of them. Rather, BHR was introduced as a new and separate discussion that evolved in parallel rather than as an integral part of these related discussions in the CSR realm. While the CSR discourse is rooted in management and business scholarship, BHR by and large originated from legal scholarship. Accordingly, it is a discussion that involves different actors – both as a social movement and as an academic discussion – and follows a different logic than CSR. As such, BHR has traditionally focused more on binding regulation, while CSR has become almost synonymous with voluntary, business-led initiatives for the promotion of responsible business practices:44 Corporate Social Responsibility (CSR) and Business and Human Rights (BHR) are like two close cousins – they are intertwined concepts focused on companies engaging in responsible and socially

Florian Wettstein, ‘CSR and the Debate on Business and Human Rights: Bridging the Great Divide’ (2012) 22/4 BEQ 739. 41 Mary Robinson, ‘Foreword’ in Rory Sullivan (ed), Business and Human Rights: Dilemmas and Solutions (Greenleaf Publishing 2003); Tom Campbell, ‘A Human Rights Approach to Developing Voluntary Codes of Conduct for Multinational Corporations’ (2006) 16/2 BEQ 255; Wesley Cragg, ‘Human Rights and Business Ethics: Fashioning a New Social Contract’ (2000) 27/1,2 JBE 205. 42 Florian Wettstein, ‘CSR and the Debate on Business and Human Rights: Bridging the Great Divide’ (2012) 22/4 BEQ 739. 43 Laura P Hartman, Denis G Amold and Richard E Wokutch (eds), Rising above Sweatshops: Innovative Approaches to Global Labor Challenges (Praeger 2003). 44 See Florian Wettstein, ‘From Side Show to Main Act: Can Business and Human Rights Save Corporate Responsibility?’ in Dorothée Baumann-Pauly and Justine Nolan (eds), Business and Human Rights: From Principles to Practice (Routledge 2016) 78; see also Anita Ramasastry, ‘Corporate Social Responsibility Versus Business and Human Rights: Bridging the Gap between Responsibility and Accountability’ (2015) 14 JHR 237. 40

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The history of BHR and its relationship with CSR  35 beneficial activities – but both concepts have key differences and hence distinct identities based on their origins. They are in essence two different but overlapping discourses: CSR growing out of scholarship from the business academy and BHR emerging from the work of legal academics and human rights advocates focused on formalistic notions of rights and remedies.45

Against this background, Ramasastry has characterized the shift of perspective from CSR to BHR as one from responsibility to accountability.46 What appears to be a merely semantic difference at first view can be traced to fundamental differences in the basic assumptions informing the two discussions. Hence, while they seem to be like two close cousins on the surface, the differences and tensions between the two grow once we dig deeper, and a role of BHR as a critique rather than an extension of CSR starts to emerge.

4.

BHR AS A CRITIQUE OF CSR

My argument is that rather than as an extension of the broader CSR discussion BHR should be understood as a critique of it, that is, as a movement whose emergence and success may not least be informed by what some perceive as the failure of CSR.47 The (perceived) failure of CSR does not manifest itself as a fading, withering movement. In fact, the booming years of CSR practice and scholarship are likely to continue for some time. Nevertheless, CSR has come under increasing scrutiny and criticism as of late. It is not that criticism is a new feat for CSR. Ever since the discussion of CSR emerged, there has been pushback against the very idea that business should have (social) responsibilities beyond merely making a profit. Traditionally, such criticism against the CSR concept has been advanced by neo-classical and later neo-liberal economists, spearheaded most notably by Milton Friedman in the 1960s and 1970s,48 and echoed, for example, by the conservative British magazine The Economist.49 More recently, however, criticism has been voiced not only by shareholder value apologists, but from within, that is, from those who share the belief, in principle, that business indeed has social responsibilities that ought to moderate its profit orientation. In the following, we briefly look at these newer strands of criticism. I will call the first one, aimed at CSR’s lack of effectiveness, ‘hot air’ criticism. The second one I will term ‘Trojan horse’ criticism. 4.1

The ‘Hot Air’ Criticism

This criticism aims at the alleged lack of effectiveness of CSR. For example, a recent survey of more than 800 CEOs carried out by the Economist Intelligence Unit found that four out of five

Anita Ramasastry, ‘Corporate Social Responsibility versus Business and Human Rights: Bridging the Gap Between Responsibility and Accountability’ (2015) 14 JHR 237, 237. 46 ibid 237. 47 ibid 237. 48 Milton Friedman, Capitalism and Freedom (UCP 1962); Milton Friedman, ‘The Social Responsibility of Business Is to Increase Its Profits’ The New York Times Magazine (New York, 13 September 1970). 49 The Economist, ‘Profit and the Public Good’ The Economist (London, 20 January 2005) accessed 12 September 2018. 45

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36  Research handbook on human rights and business respondents described their company’s supply chain as responsible.50 Yet not even a quarter of them address key issues such as child labour or climate change in their supply chains and 30 per cent had decreased their focus on supply chain responsibility over the preceding five years. Such findings fuel the criticism that CSR mostly serves as a marketing and reputational tool for corporations, while changing little to nothing about the way they do business. There is a large and growing body of literature on this criticism, much of which has been published by organizational theorists under the notion of ‘decoupling’. Decoupling,51 in its basic and original form, means the discrepancy between externally visible, formal policies, codes and reports of companies and their actual implementation as processes and practices within the company. In other words, companies respond to increasing external stakeholder pressure by adopting and committing to formal policies, but subsequently fail to significantly change their actual behaviour based on such policies. The policies thus serve a ceremonial or symbolic purpose without altering the daily work routines.52 This is often referred to as ‘window dressing’53 or ‘greenwashing’.54 For example, in their analysis of UN Global Compact signatory companies, Sethi and Schepers came to the conclusion:55 ‘However, all credible and publicly available data and documentation conclusively demonstrate that the UNGC has failed to induce its signatory companies to enhance their CSR efforts and integrate the 10 principles in their policies and operations.’56 The reasons for such decoupling processes vary; they can be deliberate or unintentional, but their consequence will be that adopted policies will fail to generate any tangible impacts. According to Delmas and Burbano,57 incidences of greenwashing have been skyrocketing in recent years. More recently, there has been increasing discussion on ‘means-ends decoupling’,58 which is a variation of the more general decoupling concept. Means-ends decoupling addresses the gap between organizational changes and the outcomes or impact they generate. In other words, organizations may well implement adopted policies or standards and change their behaviour accordingly, but it is unclear whether the change in behaviour ends up having the positive impact that was originally desired. The occurrence of means-ends decoupling can have varying reasons. Bromley and Powell point out the increasing push for evaluation and measurement as a potential source, particularly in contexts in which outcomes and effects of actions

The Economist Intelligence Unit, ‘No More Excuses: Responsible Supply Chains in a Globalised World’ The Economist (London 2017) accessed 27 October 2017. 51 John W Meyer and Brian Rowan, ‘Institutionalized Organizations: Formal Structure as Myth and Ceremony’ (1977) 83 AJS 340. 52 Patricia Bromley and Walter W Powell, ‘From Smoke and Mirrors to Walking the Talk: Decoupling in the Contemporary World’ (2012) 6/1 The Academy of Management Annals 483, 489. 53 ibid 489. 54 Magali Delmas and Vanessa Cuerel Burbano, ‘The Drivers of Greenwashing’ (2011) 54/1 CMR 64. 55 S Prakash Sethi and Donald H Schepers, ‘United Nations Global Compact: The Promise– Performance Gap’ (2014) 122 JBE 193. 56 ibid 193. 57 Magali Delmas and Vanessa Cuerel Burbano, ‘The Drivers of Greenwashing’ (2011) 54/1 CMR 64. 58 Patricia Bromley and Walter W Powell, ‘From Smoke and Mirrors to Walking the Talk: Decoupling in the Contemporary World’ (2012) 6/1 The Academy of Management Annals 483. 50

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The history of BHR and its relationship with CSR  37 are difficult to measure. This can lead to an organizational focus on measurement criteria and thus on approximations rather than on the substantive underlying goals. For example: The non-profit Room to Read, founded by former Microsoft executive John Wood, is widely lauded for its results-oriented approach to improving education in developing countries … Room to Read regularly reports on its impact by citing the number of books it has distributed, libraries built, and participants in its programs. But the organization eventually realized that many recipients lacked the minimum language skills required to use the books … Consequently, the organization came to recognize that counting numbers of participants or books distributed – a common strategy to measure outcomes for non-profit organizations – says little about whether lives are transformed or students become more literate.59

Wijen adds that combatting the classical policy–practice decoupling by enforcing stricter rules and transferring best practices may fuel means–ends decoupling particularly when dealing with opaque fields.60 It may promote a compliance focus,61 which can obstruct the view on wider often dissimilar contexts and more tailor-made solutions to complex problems. This insight, in particular, does not merely hold in relation to the plethora of voluntary sustainability standards analysed by Wijen,62 but is to be kept in mind acutely also in relation to potentially binding measures on BHR. In sum, ‘hot air’ criticism, in all its different shapes and forms, is not commonly meant to question CSR as an idea or concept. Rather, it takes aim at the practical manifestation of it, that is, the way corporations practice and implement it in their operations. More fundamental criticism comes from what we will call ‘trojan horse’ critics in this contribution. 4.2

The ‘Trojan Horse’ Criticism

Building on the decoupling observation, some criticism of CSR has even gone a step further. CSR has been described as a ‘tokenistic gesture’ that changes little about the structures underlying the global capitalist system and thus rather serves as a smokescreen or an ‘alibi’ to continue business as usual, and even to expand market forces ever deeper into the social realm.63 CSR’s pronouncedly apolitical outlook is said to obstruct and detract from a view on deeper-seated structurally rooted problems. As such, CSR has been labelled ‘a Trojan horse designed to co-opt criticism and deepen the current paradigm of global unsustainability’.64 CSR, in the words of Banerjee,65 is an ideological movement that is ‘intended to legitimize and consolidate the power of large corporations’. For example, a large part of the CSR movement has not only relied on but actively promoted a positive link between responsibility and profitability. It has established what is commonly referred to as a ‘business case’ for CSR, addressing

ibid 500. Frank Wijen, ‘Means versus Ends in Opaque Institutional Fields: Trading off Compliance and Achievement in Sustainability Standard Adoption’ (2014) 39/3 AMR 302. 61 Lynn S Paine, ‘Managing for Organizational Integrity’ (1994) 72/2 HBR 106. 62 Frank Wijen, ‘Means versus Ends in Opaque Institutional Fields: Trading off Compliance and Achievement in Sustainability Standard Adoption’ (2014) 39/3 AMR 302. 63 Peter Fleming and Marc T Jones, The End of Corporate Social Responsibility (Sage 2013) 3. 64 ibid 7. 65 Subhabrata Bobby Banerjee, ‘Corporate Social Responsibility: The Good, the Bad and the Ugly’ (2008) 43/1 Critical Sociology 51. 59 60

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38  Research handbook on human rights and business social challenges in the vocabulary of business opportunities and with a perspective on creating win-win situations. Ethics and profits, in other words, are no contradiction, but go hand in hand. While such business case rhetoric may indeed have been instrumental in bringing companies to embrace CSR as a part of their business, it tends to perpetuate rather than transform the current logic of doing business. It leaves the profit-maximization mantra of modern shareholder value-oriented corporations untouched and, in fact, extends it as a guiding ideal to tackle a variety of social and environmental issues, providing an opportunity for governments to privatize public problem solving and to retreat from essential public domains. Thus, the idea that CSR can change the current mode of doing business on such grounds is thoroughly misguided, since you cannot change the dominant mode of doing business by catering to the very rationale that feeds it. CSR, as Fleming and Jones suggest,66 is ‘unwittingly wedded to a naturalized notion of Western neoliberal capitalism’. While such criticism, of course, always addresses certain specific subsets of the CSR discussion rather than the underlying idea of responsible business as such, they do capture some of the dominant, often implicit undercurrents of contemporary thinking on CSR. One dominant assumption underlying much of the current thinking on CSR is that we are essentially dealing with private responsibility. Two essential features inform this view of corporate responsibility as private. Those are its assumedly apolitical character and its voluntary nature. As a ‘product’ of neoliberal thought, conventional notions of CSR subscribe to the private-public dichotomy as it is defining for liberal theory. Thereby, states are seen as the only relevant public or political actors, while corporations belong to the private realm. Such a liberal model draws a clear line between private economic activities on the one hand and public political activities on the other. The political order aims at guaranteeing the stability of the legal context of the private actor so that individual freedom is protected both vis-a-vis the state and the fellow citizen.67

A large part of CSR theory, particularly what Scherer and Palazzo call the positivist stream of CSR research,68 subscribes to and derives from this theoretical assumption,69 and thus conceptualizes corporations as essentially apolitical and corporate responsibility as purely private. Whereas this does not give corporations a free pass to do as they please within the private space provided by the state, they are not seen to have any responsibility for broader public concerns, unless they be themselves integrated into the private domain, that is, privatized. Private responsibility – this is the second feature – is perceived as essentially voluntary. Symptomatically, in its 2001 green paper on CSR, the European Commission essentially defined CSR as ‘a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis’.70 In 2006, that is, one year into John Ruggie’s mandate, the Commission still viewed CSR

Peter Fleming and Marc T Jones, The End of Corporate Social Responsibility (Sage 2013) 25. Andreas G Scherer and Guido Palazzo, ‘Toward a Political Conception of Corporate Responsibility: Business and Society Seen from a Habermasian Perspective’ (2007) 32/4 AMR 1096, 1106. 68 ibid 1106. 69 ibid 1106. 70 European Commission, Promoting a European Framework for Corporate Social Responsibility (Green Paper, Office for Official Publications of the European Communities, 2001). 66 67

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The history of BHR and its relationship with CSR  39 as ‘fundamentally about voluntary business behavior’.71 Even though the 2001 report does acknowledge in a brief paragraph that CSR ‘has a strong human rights dimension’, it seems that the voluntarism that has informed a large part of the CSR discussion until very recently stands in stark contrast with a focus on human rights as ethical imperatives on the one hand,72 and the focus of the larger BHR discussion on binding regulation on the other. In its 2011 communication on CSR, the European Commission aligned its approach with the newly published UNGPs, changing its definition of CSR to ‘the responsibility of enterprises for their impacts on society’73 and thus shedding voluntariness as a defining element of CSR. The evolution of the European Commission’s official definition can perhaps be seen as representative of a large part of the general CSR discussion, which evolved from largely philanthropic approaches in the 1970s all the way throughout the 1990s to more core business oriented approaches in the 2000s. Nevertheless, the assumption even of such core business oriented responsibility as essentially private still looms large today. In this assumption about the private nature of corporate responsibility, we find the basic chasm between conventional CSR approaches and BHR: while a CSR perspective on corporate human rights responsibility implies their shift into the realm of private responsibility, a BHR perspective would advocate for a shift in the opposite direction, that is, for an extension of corporate responsibility into the public realm and thus for a reinterpretation of corporate responsibility as inherently public in nature. Or put slightly differently: rather than extending private responsibility into the public realm, BHR extends public accountability for human rights into the private domain. The difference between the two perspectives is not merely semantic but fundamental: rather than a privatization of human rights, a BHR perspective demands a politicization of corporate responsibility. This is the essence of an understanding of BHR as a critique rather than an extension of CSR. Addressing human rights though the lens of private responsibility turns human rights into one voluntary, apolitical CSR issue among others, without a clear hierarchy or allocation of priorities, leaving considerable leeway and indeed discretion for companies regarding whether, when and how to address them. Addressing human rights, thus understood, does not require a change in companies’ business models or in the mode of doing business more generally; at best it adds another dimension to the CSR programmes that are already in place and may help identify some issues for companies that have formerly remained in the dark; at worst, human rights serves merely as a new label within existing CSR programmes, without, however, changing anything about them in a substantive way.

71 Commission of the European Communities, Implementing the Partnership for Growth and Jobs: Making Europe a Pole of Excellence on Corporate Social Responsibility (Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, COM/2006/0136 final, 22 March 2006) para 2. 72 Florian Wettstein, ‘Human Rights as Ethical Imperatives for Business: The UN Global Compact’s Human Rights Principles’ in Joanne Lawrence and Paul W Beamish (eds), Globally Responsible Leadership: Managing According to the UN Global Compact (Sage 2012) 73. 73 European Commission, A Renewed EU Strategy 2011–14 for Corporate Social Responsibility (Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, COM/2011/ 681 final, 25 October 2011) para 6, accessed 2 March 2020.

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40  Research handbook on human rights and business Hence, CSR and BHR adopt a rather different normative outlook, which manifests itself also in more tangible differences at the institutional level. While BHR has traditionally espoused a more rigorous approach with a tendency to focus on legal enforcement and accountability, CSR has espoused collaborative schemes of providing positive value: ‘The quest for accountability shapes a very different narrative for BHR, which takes it more into the realm of binding law, state sponsored oversight, and the importance of access to remedy as a measure of corporate accountability.’74 This being said, the dominant position of the UNGP and its protagonists in the current discussion has certainly shifted the focus to soft approaches and mechanisms in BHR, and particularly so in the practice and policy space. However, in response we have seen a further accentuation of accountability movements at the core of the discussion, which stand in clear delineation from more traditional CSR approaches. Thus, even though there is substantive debate and opinions on binding measures naturally vary among BHR scholars, hard law and regulation as a subject matter has played a much more significant and decisive part in shaping the BHR agenda and discussion than has been the case with CSR. This is the case at both the global and the domestic levels. While, as outlined above, a new push for a global business and human rights treaty is underway, recent domestic developments in a number of different countries show an ever more decisive push for hard law approaches to a variety of BHR issues. As seen above, such approaches reach from transparency and reporting rules around the sourcing and trade of conflict minerals (US Dodd–Frank Act; EU Directive) to mandatory reporting frameworks to combat modern slavery (UK Modern Slavery Act), to mandatory due diligence provisions to tackle specific issues such as child labour (The Netherlands) or even more general human rights due diligence mandates (Duty of Vigilance Law in France). Similar initiatives are under way in many other countries.

5.

CSR AS A HINDRANCE TO BHR

Having defined BHR as a critique rather than an extension or a subset of the broader CSR discourse, it is only a small step to see that CSR has potential to be turned against BHR. A CSR perspective on human rights tends to favour private responsibility schemes over public accountability structures. While both may have their advantages and disadvantages, depending on the context and situation, the former can be used to distract from, block and prevent the latter also in situations in which binding measures would be called for. We can see this scenario play out today, both at the corporate and at the policy levels. 5.1

CSR as a Hindrance in Business Practice

There have been a number of empirical studies – both qualitative and quantitative – on the implementation and sensemaking of human rights responsibility within (predominantly multinational) companies. The gist of those publications can be summarized as follows: despite and perhaps counter to a common perception that there is much effort and activity among companies to implement human rights responsibility and the UNGPs, current surveys seem to show 74 Anita Ramasastry, ‘Corporate Social Responsibility versus Business and Human Rights: Bridging the Gap Between Responsibility and Accountability’ (2015) 14 JHR 237, 238.

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The history of BHR and its relationship with CSR  41 that too few companies are currently engaged in a serious and holistic implementation process. For example, the results of a recent study by the Swiss NGOs Bread for All and Fastenopfer on the state of affairs of human rights implementation among the 200 largest Swiss multinational companies prove sobering:75 61 per cent of the surveyed companies have neither a code of conduct nor a policy on human rights (large publicly traded companies: 50 per cent) and do not publish anything related to human rights. Only 11 per cent of the surveyed Swiss companies explicitly endorsed the UNGPs and have started to implement them in their operations, although to varying degrees (large publicly traded companies: 19 per cent). Six years after the publication of the UNGPs, only nine companies in total are engaged in conducting human rights impact assessments. Here too, the approach and quality of such impact assessments vary from company to company. A further survey of 152 companies, large and small, multinational and national, from all regions of the world, studied the difference between companies conducting dedicated human rights due diligence and companies that address human rights issues through preexisting processes (such as health and safety procedures) and without using human rights terminology.76 The results are striking: 77 per cent of the companies conducting dedicated human rights due diligence detected adverse impacts on human rights in the process, while only 19 per cent did so in the other group. In the words of the authors of the study: ‘Nearly 80 per cent of companies using dedicated HRDD do identify adverse impacts, whereas over 80 per cent of companies using non-specific HRDD do not identify adverse impacts.’77 In addition, most of the detected human rights impacts of the non-specific groups are in the category of employee rights, while there is little or no focus on other human rights categories.78 Thus, as the authors conclude, ‘where dedicated HRDD is undertaken, human rights [impacts] are more likely to be detected than during non-specific human rights processes’.79 What seems concerning about these findings is that most companies seem indeed to choose the route of integrating human rights responsibility into existing structures and processes rather than setting up new processes targeting human rights in a more specific manner. For example, recent qualitative research on human rights implementation in UK companies reveals that a majority of companies which have started addressing human rights in their operations tend to do so using a pre-existing CSR frame:80 ‘For companies with CSR governance structures and processes, such as teams, internal committees and practitioner forums, respondents primarily used these channels to debate, discuss and clarify the meaning and relevance of HR.’81 Similar observations were made specifically in the UK hospitality sector,82 and for mining companies, both of which tend to translate human rights and ultimately ‘domesticate’ them in

Chantal Peyer, Die Menschenrechtspolitik der Schweizer Konzerne: Eine Bestandesaufnahme (Brot für alle, Fastenopfer 2016). 76 Robert McCorquodale, Lise Smit, Stuart Neely and Robin Brooks, 2017. ‘Human Rights Due Diligence in Law and Practice: Good Practices and Challenges for Business Enterprises’ (2017) 2/2 BHRJ 195, 206. 77 ibid 207. 78 ibid 208. 79 ibid 207. 80 Louise J Obara and Ken Peattie, ‘Bridging the Great Divide? Making Sense of the Human Rights– CSR Relationship in UK Multinational Companies’ (in press) JWB. 81 ibid 7. 82 Samentha Goethals, From Business and Human Rights to Human Rights in Business (PhD Thesis, Oxford Brookes University 2016). 75

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42  Research handbook on human rights and business their pre-existing CSR organizations.83 Not surprisingly, there is a tendency among such companies to avoid human rights terminology in internal and informal communications altogether. Thus, companies tend to prefer CSR terminology over human rights vocabulary, the latter being seen as overly political, controversial and unhelpful.84 Precisely in such areas, it seems, the normative power of human rights (responsibility) is turned into a noncommittal CSR issue, which depends solely on the charity and goodwill of the company. Indeed, such companies often do frame their responsibility in terms of voluntary or philanthropic initiatives, even if the issues at stake are directly or indirectly connected to human rights.85 5.2

CSR as a Hindrance at the Policy Level

CSR jargon has also entered and permeated public policy-making. The reference to private responsibility threatens to dilute public measures aimed at corporate accountability and has the potential to serve as a roadblock against tighter human rights regulation at the policy level. Concerned about their own competitiveness, governments point to corporations’ CSR structures and their voluntary initiatives to justify inaction and refusal to consider and implement binding accountability measures in the BHR space that could put them in a disadvantage against other countries. The Swiss government’s approach to BHR in general, and its position on the Swiss ‘Responsible Business Initiative’ in particular, is an illustrative case in point. In 2015, Switzerland published its general CSR strategy and position.86 This broader CSR strategy contains a chapter on human rights, which outlines the general stance of Switzerland on BHR. The Federal Council emphasizes that its CSR strategy and the NAP on BHR should be seen as complementary without a given hierarchy.87 However, it is evident that human rights are seen as one area of the broader CSR agenda outlined in the report on the CSR strategy. For the sake of consistency, the NAP on BHR must at least not contradict the fundamental principles and assumptions underlying the broader perspective on CSR. This was confirmed by the publication of the Swiss NAP on BHR in December 2016.88 The belief and trust in the voluntarism of the CSR mantra is all encompassing in the NAP, leading the Swiss government to reject any new binding and regulatory approach in the BHR space at the outset. Consistent with this preordained stance on BHR policy, the Swiss Federal Council recently recommended to 83 Ioana Tuta, Created and Lost in Translation: The Corporate Management of Human Rights (PhD Thesis, Graduate Institute Geneva 2017). 84 Louise J Obara, ‘“What Does This Mean?” How UK Companies Make Sense of Human Rights’ (2017) 2/2 BHRJ 249. 85 Louise J Obara and Ken Peattie, ‘Bridging the Great Divide? Making Sense of the Human Rights– CSR Relationship in UK Multinational Companies’ (in press) JWB. 86 Schweizerische Eidgenossenschaft, Gesellschaftliche Verantwortung der Unternehmen (Positionspapier und Aktionsplan des Bundesrates zur Verantwortung der Unternehmen für Gesellschaft und Umwelt, 2015) accessed 2 March 2020. 87 Schweizerische Eidgenossenschaft, Botschaft zur Volksinitiative ‘für verantwortungsvolle Unternehmen – zum Schutz von Mensch und Umwelt’ (17.060, 15 September 2017) accessed 2 March 2020. 88 Schweizerische Eidgenossenschaft, Bericht über die Schweizer Strategie zur Umsetzung der UNO-Leitprinzipien für Wirtschaft und Menschenrechte (2016) accessed 2 March 2020.

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The history of BHR and its relationship with CSR  43 the Swiss public that they reject a proposal to mandate human rights due diligence for Swiss companies when it is the subject of a popular referendum, expected in 2020.89 Thus, rather than promoting a ‘smart mix’ of both binding and voluntary measures and thus advancing the BHR discussion in a meaningful and effective way, the Swiss NAP serves as a roadblock to limit the possibilities to move the discussion forward. It has become common practice for states, businesses and business associations to oppose binding measures by reference to the usually soft formulations in their respective countries’ NAPs or to the vague stance of the UNGPs, particularly in regard to measures with extraterritorial effects. All this being said, the argument in this section is not against CSR per se, but rather against playing CSR off against BHR. As argued elsewhere,90 there is something to gain from CSR also for BHR, particularly when it comes to adopting proactive responsibility beyond ‘mere’ non-violation of human rights. A CSR mindset can also balance a too rigorous compliance mentality in corporations, which can turn human rights respect into mere tick-box exercises without paying adequate attention to value foundations and to the importance of the development of rights respecting business cultures and leadership structures.

6.

OUTLOOK AND CONCLUSION

This chapter provided some insight into the history of the BHR field, particularly in relation to the older, more established discussion on CSR. This last section shall contemplate the future of the two discourses. Three possible scenarios are outlined below; which one of them will ultimately prevail is greatly dependent on which protagonists succeed in shaping the dominant narrative(s) in the BHR discussion most decisively. For example, businesses and business associations have tightened their grip on the prevailing BHR narrative, particularly against the background of looming national and international regulation. Similarly, the mushrooming commercial as well as not for profit BHR consultancy sector’s release of a host of guiding materials on the implementation of various codes and standards is not merely providing practical assistance to businesses, but is increasingly unfolding influence over the policy agenda in BHR matters.

89 The ‘Swiss Responsible Business Initiative’ is a popular initiative launched by a coalition of more than 80 NGOs, unions and other civil society organizations and associations, aiming at mandating the Federal Council to take appropriate measures to ensure business respect for human rights in general, and, more specifically, to implement mandatory due diligence and effective parent company liability structures within Swiss law. As with any popular initiative in Switzerland, the Federal Council must issue a recommendation to the Swiss public in regard to the impending referendum. Furthermore, the Federal Council can issue a counterproposal, which will then be voted on by the Swiss people along with the initiative. In the case of the Responsible Business Initiative, the Federal Council recommended rejection without offering a counterproposal. 90 Florian Wettstein, ‘From Side Show to Main Act: Can Business and Human Rights Save Corporate Responsibility?’ in Dorothée Baumann-Pauly and Justine Nolan (eds), Business and Human Rights: From Principles to Practice (Routledge 2016).

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44  Research handbook on human rights and business 6.1

Scenario 1 – Coexistence

In this scenario, not much would change in the relation between CSR and BHR in the future. The two debates would continue to live somewhat parallel lives with occasional overlaps both in issues and topics addressed and in regard to the participants in the debate, both in practice and in academia. After a period in which the debate has become both increasingly multi-disciplinary in its perspectives and also increasingly narrow in its focus on the UNGPs as its focal point, and at a time in which CSR scholars and practitioners have increasingly started to take note of and become part of this debate, this scenario perhaps seems rather counter-intuitive. However, there are signs that after a time of convergence, we are perhaps entering another period of divergence. With treaty negotiations under way in the UN Human Rights Council and new laws being implemented and legal and regulative proposals discussed particularly at the home state level, BHR seems to be taking a turn towards a more legalistic approach again. Accordingly, the ‘old’ division between management-driven CSR solutions and law-driven BHR approaches seems to accentuate again today. The two disciplines, as a consequence, seem to be diverging rather than converging today.91 6.2

Scenario 2 – Cooptation

What we see happening at the corporate level today may be a precursor of what is to happen at a much broader level. That is, BHR is being integrated into existing CSR frameworks, both at the operational level of businesses as well as at the policy-level of national and international politics and governance. BHR, in other words, would be turned into a CSR issue and treated as such both within corporations and at national and international governance levels. As discussed above, there are increasingly clear signs of such developments today. The result of this would be the cooptation of BHR by the logics of voluntariness, corporate discretion and private responsibility. I have outlined above why this should be considered concerning and potentially detrimental to human rights protection. However, as a response to the increasing cooptation, the BHR core discussion will likely recalibrate and focus even more strongly on providing a (legal and regulatory) alternative to conventional CSR approaches. I believe that below the surface of the described homogenization processes in practice, such a recalibration of BHR efforts is already happening today, leading back to scenario 1 as a more likely path to the future of BHR. 6.3

Scenario 3 – Replacement

Is it thinkable that the current momentum of BHR can be sustained and even increased, and that eventually BHR will come to replace CSR altogether? As described above, CSR has come under increasing scrutiny and criticism in recent times for its vagueness, its lack of impact and its susceptibility to serve as a smokescreen for ulterior motives. Civil society organizations have become increasingly vary of non-financial reporting and of the effectiveness of corporate social responsibility policies and procedures of companies. It seems unlikely, though, that the growing sceptical movement will develop sufficient force to displace CSR altogether. What is 91 Anita Ramasastry, ‘Corporate Social Responsibility versus Business and Human Rights: Bridging the Gap Between Responsibility and Accountability’ (2015) 14 JHR 237, 238.

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The history of BHR and its relationship with CSR  45 more likely, however, is that the notion of CSR will eventually disappear in order to shed the negative connotations that are increasingly associated with it. From that perspective, a more acute danger may be, perhaps, that CSR programmes will come under the banner of BHR in the future, that is, that a reverse cooptation will take place: rather than CSR integrating BHR as a CSR issue, the reference to BHR will be used to disguise ‘CSR as usual’ within corporations. While such reverse cooptation will likely not happen across the board, there is a real danger that certain companies will misuse the ‘BHR label’ to mask conventional CSR approaches in the future.

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3. The rise and fall of the Alien Tort Statute Beth Stephens

I INTRODUCTION In 1996, a small group of farmers, herders, fishermen and traders from rural Burma filed a civil lawsuit against Unocal Oil Corporation in a US federal court, alleging that the US company was responsible for murder, torture, rape, forced labour and other abuses committed while it collaborated with the Burmese military regime to build an oil pipeline.1 Nine years later, the plaintiffs settled their lawsuit for tens of millions of dollars, after uncovering documents showing that the corporation had knowingly assisted the Burmese regime as it engaged in the human rights abuses.2 The Unocal litigation produced a precedent-setting appellate court decision that held that an eighteenth-century US statute, the Alien Tort Statute (ATS),3 authorized human rights litigation against corporations.4 From 1980 onward, survivors of human rights abuses have used the ATS to file civil lawsuits in US federal courts seeking compensation for the harm done to them and their family members.5 As civil lawsuits, the cases sought monetary damages, not criminal penalties.6 Initially filed against individual defendants – usually former government officials – in the 1990s lawsuits began to target corporate defendants as well, alleging that the corporations were legally liable for human rights abuses. Although the US Supreme Court affirmed the application of the ATS to human rights claims in a 2004 decision,7 the Court sharply restricted the scope of the ATS in decisions issued in 2013 and 2018.8 Under the new interpretation of the statute, only a handful of cases are likely to survive. The use of the ATS as a vehicle for human rights accountability dates to a 1980 decision in Filártiga v Peña-Irala, in which a US federal court held that the ATS authorized a civil lawsuit against a Paraguayan police officer who had tortured a young man to death and was

1 Now known as Myanmar, the country was known as Burma in the 1990s. For a full account of the case and the events underlying the litigation, see Katie Redford and Beth Stephens, ‘The Story of Doe v Unocal: Justice Delayed but Not Denied’ in Deena R Hurwitz and others (eds), Human Rights Advocacy Stories (Foundation Press 2009). 2 Although the amount of the settlement was not disclosed, news articles at the time reported that it amounted to $30 million. See Paul Magnusson, ‘A Milestone for Human Rights’ (Bloomberg, 24 January 2005) accessed 6 June 2018. 3 28 USC § 1350. 4 Doe v Unocal Corp 395 F 3d 932 (9th Cir 2002), vacated 395 F 3d 978 (9th Cir 2003). 5 For a more extensive analysis of the history of the Alien Tort Statute, see Beth Stephens, ‘The Curious History of the Alien Tort Statute’ (2014) 89 Notre Dame L Rev 1467. 6 In the US legal system, private parties cannot initiate criminal prosecutions. 7 Sosa v Alvarez Machaín 542 US 692 (2004). 8 Kiobel v Royal Dutch Petroleum Co 569 US 108 (2013); Jesner v Arab Bank, PLC 138 S Ct 1386 (2018).

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The rise and fall of the Alien Tort Statute  47 later found to be living in the United States.9 Survivors and human rights advocates responded by bringing cases addressing human rights abuses in countries around the world, filed against former government officials who were either living in or visiting the United States. ATS cases received largely favourable commentary for many years, so long as the cases were filed against low-profile defendants who had little political sway in the United States. The ATS became more controversial, however, when cases were filed against former officials of more powerful foreign governments, against US government officials and against corporations. A US Supreme Court decision in 2013 sharply narrowed the statute,10 and a 2018 decision dealt it another blow by barring claims against foreign corporations.11 The backlash against corporate-defendant ATS claims dovetailed with Supreme Court decisions that limited corporate accountability through other restrictions on civil litigation against corporations and, more generally, on the use of the courts to redress wrongs.12 These rulings together have significantly limited the ability of those impacted by human rights violations to hold perpetrators of those abuses accountable. The history of the ATS reflects a path common to the struggle for human rights accountability within the United States and internationally. Survivors of abuses and human rights advocates seek means to hold accountable perpetrators and to deter further abuses. Although most efforts are unsuccessful, those that have even limited impact are quickly duplicated by others facing similar abuses. As the initiatives multiply, they provoke a backlash that often sharply limits their reach. But despite these setbacks, efforts to seek redress and hold perpetrators accountable inspire new, creative responses. True to this model, ATS litigation played an important role in the movement towards corporate human rights accountability. Individual cases led to several important settlements and empowered the communities impacted by the abuses underlying the litigation. More generally, the cases contributed to rapid growth in the use of domestic courts in many countries to challenge corporate abuses. Fear of litigation provided an incentive for corporations to participate in business and human rights initiatives, including internal human rights assessments and grievance mechanisms, national and international human rights projects and the development of international human rights principles. The sections that follow trace the rise and fall of the ATS as a mechanism to hold corporations accountable for human rights abuses, from the statute’s enactment in the eighteenth century to the Supreme Court decisions that limited its modern application. The chapter concludes with an assessment of the impact of corporate-defendant ATS litigation.

II

THE EIGHTEENTH-CENTURY ORIGINS OF THE ATS

The US Congress enacted the ATS in 1789, shortly after the ratification of the US Constitution, as part of the Judiciary Act that created the federal court system.13 The statute, which is virtually unchanged since that time, reads: ‘The district courts shall have original jurisdiction



9

11 12 13 10

630 F 2d 876 (2d Cir 1980). Kiobel (n 8). Jesner (n 8). See notes 52–54. Judiciary Act of 1789 ch 20 § 9, 1 Stat 73.

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48  Research handbook on human rights and business of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.’ Although only scant records exist to explain the goals of the legislators who drafted and adopted the ATS, modern scholars have focused on two key points.14 First, jurists in the eighteenth century viewed unwritten natural law, including the law of nations, as binding on domestic governments. The framers of the US Constitution stated repeatedly that the law of nations was part of the laws of the United States – and of every nation. Second, the framers were eager to ensure that the federal government had the power to enforce international law, because incidents in which the state governments refused to abide by international law obligations – including, for example, the treaty that recognized the enforceability of debts owed to British creditors after the Revolutionary War – had triggered threats by foreign governments. They clearly understood that disputes over violations of international law could endanger the fledgling US government. The Constitution addressed these concerns by granting the federal government authority over most issues involving foreign relations, including the power to ‘define and punish offenses against the law of nations’.15 The ATS ensured that lawsuits for violations of the law of nations and treaties would be heard in the new federal court system, not in the state courts. Researchers have uncovered only one significant reference to the ATS in the following decade. In 1795, US Attorney General William Bradford referred to the statute as a mechanism by which foreign citizens could obtain a civil remedy for a violation of international law and noted that offering such a remedy could help lessen the foreign relations tensions triggered by the incident.16 The statute then fell into obscurity until 1980.17 The Supreme Court referred to the ATS only once before 1980, in a 1964 decision that described it as one of several statutes ‘reflecting a concern for uniformity in this country’s dealings with foreign nations and indicating a desire to give matters of international significance to the jurisdiction of federal institutions’.18

For a detailed analysis of this history, see Stewart Jay, ‘The Status of the Law of Nations in Early American Law’ (1989) 42 Vanderbilt L Rev 819, 824–8. 15 US Constitution art I § 8 cl. 10. 16 Breach of Neutrality (1795) 1 Op Atty Gen 57, 59. In addition, two cases mentioned the ATS in the 1790s. Bolchos v Darrell 3 F Cas 810 (DSC 1795) (asserting ATS jurisdiction over suit involving ‘property’ seized in violation of international law; alleged ‘property’ consisted of three enslaved people); Moxon v The Fanny 17 F Cas 942, 948 (D Pa 1793) (rejecting claim because suit did not involve a claim for ‘a tort only’). 17 The ATS was cited by fewer than two dozen reported cases before 1980, only one of which actually found it relevant. Kenneth C Randall, ‘Federal Jurisdiction over International Law Claims: Inquiries into the Alien Tort Claims Act’ (1986) 18 NYU J Intl L & Policy 1, 4-5 nn 15–16. The one case that relied on it, Adra v Clift 195 F Supp 857 (D Md 1961), asserted ATS jurisdiction over a claim for wrongful interference with child custody where a mother had used a false passport to take her children from their father and bring them to the United States. 18 Banco Nacional de Cuba v Sabbatino 376 US 398, 427 n 25 (1964). 14

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The rise and fall of the Alien Tort Statute  49

III

THE REVIVAL OF THE ATS: FILÁRTIGA V PEÑA-IRALA AND EARLY ATS CASES

The modern revival of the ATS began when the family of Joel Filártiga, a 17 year old Paraguayan, filed a suit in a US federal court against the Paraguayan police officer who had tortured Joel to death. The police officer was living in the United States at the time the lawsuit was filed, having left Paraguay to avoid pressure to hold him accountable for the torture and murder. In a 1980 decision, Filártiga v Peña-Irala,19 a federal appellate court held that the ATS afforded jurisdiction over the claim because it involved an ‘alien’ suing for torture, which constituted a ‘tort’ in violation of ‘the law of nations’, now known as international law. Before reaching a decision, the court solicited the views of the US executive branch, led at the time by President Jimmy Carter, who had emphasized the protection of human rights during his administration. After extensive debate,20 the executive branch filed a statement supporting the court’s assertion of jurisdiction, noting the high level of international consensus about the prohibition of torture. The Filártiga decision contained a number of limiting factors. The court noted that: the prohibition on torture was ‘a settled rule of international law’ that commanded ‘the general assent of civilized nations’; Paraguay had not suggested that its ex-official was entitled to immunity; the executive branch agreed with the assertion of jurisdiction; and the suit could be dismissed under the doctrine of forum non conveniens if remedies were available in Paraguay.21 Limited to its facts and holding, Filártiga held that when a person responsible for an egregious, internationally recognized human rights abuse flees to the United States, those injured can sue under the ATS if suit is not possible in the place where the abuses took place, the home country does not assert immunity and the US government does not object. However, the opinion also contained stirring rhetoric in support of human rights accountability, emphasizing that ‘international law confers fundamental rights upon all people vis-à-vis their own governments’,22 including the right to be free from physical torture,23 and that states have a right to hold accountable those who commit torture and to deny ‘safe haven’ to torturers.24 The opinion concludes with language that helped to inspire the dozens of ATS cases that followed: In the twentieth century the international community has come to recognize the common danger posed by the flagrant disregard of basic human rights and particularly the right to be free of torture. Spurred first by the Great War, and then the Second, civilized nations have banded together to prescribe acceptable norms of international behavior ... Among the rights universally proclaimed by all nations ... is the right to be free of physical torture. Indeed, for purposes of civil liability, the torturer has become – like the pirate and slave trader before him – hostis humani generis, an enemy of all mankind. Our holding today, giving effect to a jurisdictional provision enacted by our First Congress, is a small but important step in the fulfillment of the ageless dream to free all people from brutal violence.25

Filártiga (n 9). For a documentary history of this debate, see William J Aceves, The Anatomy of Torture: A Documentary History of Filártiga v Peña Irala (Brill Nijhoff 2007) 21 Filártiga (n 9) 879, 881–82, 884, 890. 22 ibid 885. 23 ibid 890. 24 ibid. 25 ibid. 19 20

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50  Research handbook on human rights and business For almost two decades after the Filártiga decision, ATS cases proceeded with little controversy. Academic commentary was largely favourable. Only a few dozen cases were decided and only about eight cases resulted in judgments for plaintiffs, two after trials and the rest through default judgments.26 A class action against Ferdinand Marcos, for example, for thousands of executions, disappearances and torture, led to a trial and a judgment against his estate.27 A case against Radovan Karadžić, leader of the Bosnian Serbs during the brutal war in Bosnia-Herzegovina, ended in a default judgment against Karadžić.28 The bulk of the cases – about two dozen – were dismissed for a variety of reasons, including failure to allege a violation of a core human rights norm, sovereign immunity, forum non conveniens and the statute of limitations. Every court to reach a decision on an ATS case agreed that the statute afforded federal court jurisdiction over claims for violations of core human rights violations, if the defendant was in the United States at the time the lawsuit was started. Although the administration of President Ronald Reagan filed briefs in two cases urging the courts to reject the Filártiga precedent, the courts did not follow the administration’s views.29 And despite calls to modernize the statutory basis for human rights litigation, Congress made no effort to repeal or amend the ATS.30

IV

THE BATTLE IS JOINED

ATS cases became more controversial in the late 1990s as litigants filed claims against defendants with more political clout: corporations, officials of foreign governments allied with the United States, and, in the aftermath of 11 September 2001, US government officials accused of violating human rights in the ‘war on terror’. In 2004, the Supreme Court upheld the Filártiga interpretation of the statute, leading to another decade of increasingly contentious ATS litigation against both corporations and individual defendants. A

ATS Claims against Powerful Defendants

About two dozen ATS claims against corporations were decided before Unocal was filed in 1996, many of them pre-dating Filártiga. Most were dismissed for failure to state an international law violation.31 None of the early decisions raised the issue of whether the ATS applied to corporations and, until the 1990s, none attracted much attention.

For details, see Stephens, ‘Curious History’ (n 5) 1487–88. Hilao v Estate of Marcos 103 F 3d 789 (9th Cir 1996). 28 Kadic v Karadžić 70 F 3d 232 (2d Cir 1995). 29 Brief for the United States as Amicus Curiae, Trajano v Marcos 878 F 2d 1439 (9th Cir 1989) (Nos 86-2448, 86-2449, 86-15039, 87-1706, 87-1707); Brief for the Federal Appellees, Sanchez-Espinoza v Reagan 770 F 2d 202 (DC Cir 1985) (No. 83-1997). 30 Congress did enact a separate statute in 1992, the Torture Victim Protection Act, 28 USC § 1350 (note), authorizing suits for torture and extrajudicial executions; the Supreme Court held in 2004 that it did not authorize lawsuits against corporate defendants. Mohamad v Palestinian Authority 566 US 449 (2012). Two additional statutes enacted in the 1990s that offer limited means to sue corporations for specific violations are discussed in Section V. 31 For a full list, see Beth Stephens, ‘Judicial Deference and the Unreasonable Views of the Bush Administration’ (2008) 33 Brooklyn J Intl L 773, app B 813–14. 26 27

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The rise and fall of the Alien Tort Statute  51 A number of developments in the mid-1990s changed the landscape. First, an ATS case against a private individual, Kadic v Karadžić, decided in 1996, provided a clear legal theory for holding corporations liable for human rights violations. Kadic addressed claims against a private defendant – the leader of the Bosnian Serb enclave, a self-declared, unrecognized entity – and ruled that a non-state actor could be held liable under the ATS either for claims that did not require state action, such as genocide, slavery or crimes against humanity, or when acting in concert with a state actor. Both theories could be applied to corporate defendants. At the same time, class action lawsuits against corporations seeking reparations for abuses committed during the Second World War attracted widespread attention.32 The US government supported a push for compensation and helped negotiate multi-billion dollar settlements with German and Austrian banks and insurance companies. Class action lawsuits against dozens of corporations active in South Africa under apartheid, filed in 2002, triggered fears that that the Holocaust litigation model might lead to broad corporate liability for human rights violations. Those fears became more palpable after a 2002 decision in Unocal opened the door for further corporate-defendant litigation, holding that a corporation could be sued under the ATS if it provided ‘knowing practical assistance or encouragement’ that had ‘a substantial effect on the perpetration’ of human rights abuses.33 Corporate-defendant litigation triggered concerns about the impact on international businesses. An article in The Wall Street Journal stated that the cases ‘could subject a long list of US companies to lawsuits in American courts’.34 A 2002 column in The Nation noted that Wall Street was ‘paying attention’, ‘watching and waiting – to see if Third World locals screwed by transnationals can obtain justice in [US] courts far from their villages’.35 Observers claimed that stock fund managers were worried about whether human rights damage awards might impact corporate stock prices.36 Two additional issues involving claims against individual defendants also drew increased attention to ATS litigation. Early ATS claims against government officials were generally noncontroversial, in large part because the governments of the former officials disavowed the official’s conduct. Some governments affirmatively waived any immunity that their former official might claim and encouraged US courts to hear the claims.37 In a case against a Chinese official involving abuses against the Falun Gong, however, the Chinese government asserted that the official was acting within his authority. The court rejected that defence, finding that the acts violated Chinese domestic law. The case drew the attention of the US executive branch, which was concerned about the impact on US relations with China.38

For an overview of the Holocaust litigation, see Michael J Bazyler, Holocaust Justice: The Battle for Restitution in America’s Courts (NYU Press 2005). 33 Unocal (n 4) 947. 34 Peter Waldman, ‘Unocal Will Stand Trial over Myanmar Venture: In a First, Judge Rules US Company May Be Liable for Overseas Abuses’ (Wall Street Journal 11 June 2002) accessed 6 June 2018. 35 David Corn, ‘Corporate Human Rights’ (The Nation 15 July 2002) accessed 6 June 2018. 36 ibid. 37 See Paul v Avril 812 F Supp 207, 210 (SD Fla 1993), noting that the government of Haiti had waived any immunity to which the defendant, a former head of state, might be entitled. 38 See Jacques Delisle, ‘Human Rights, Civil Wrongs and Foreign Relations: A “Sinical” Look at the Use of US Litigation to Address Human Rights Abuses Abroad’ (2002) 52 DePaul L Rev 473. 32

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52  Research handbook on human rights and business Even more controversial, in the aftermath of the 11 September 2001 attacks, advocates for victims of torture, unlawful rendition and other abuses committed by US government officials filed ATS claims against those officials. Although every ATS claim against the US government or its officials was dismissed,39 the mere possibility of such litigation triggered outrage in government circles. With ATS claims targeting corporations, officials of friendly foreign governments and US government officials, the array of powerful opponents of the statute took on new strength. B

The Supreme Court Decision in Sosa v Alvarez-Machaín

The Supreme Court denied multiple petitions requesting review of ATS cases in the 1980s and 1990s. By the time Sosa v Alvarez-Machaín came before the Court, however, the growing range of ATS defendants had increased the pressure on the Court to determine if the Filártiga interpretation of the eighteenth-century statute was correct. The Sosa case history was most unusual for a human rights case. The case began with the brutal torture and murder of a US drug enforcement agent, Enrique Camarena-Salazar, in Mexico in 1985.40 In 1990, the US government issued a warrant for the arrest of Humberto Alvarez-Machaín, alleging that he was one of a group of Mexicans responsible for Camarena-Salazar’s torture and murder. The Drug Enforcement Administration then hired Mexican nationals, including Jose Francisco Sosa, to kidnap Alvarez and bring him to the United States for trial. Alvarez was abducted from his home, held overnight in a motel and flown to the United States, where he was arrested by federal officers. His claim that the charges should be dismissed because of his unlawful seizure in Mexico was appealed all the way to the Supreme Court, which refused to dismiss the charges and remanded him for trial. At that trial, he was acquitted of the criminal charges and was released and returned to Mexico. Alvarez-Machaín then sued the individuals responsible for his abduction, including Sosa, under the ATS and won a judgment for $20,000 against Sosa. After multiple appellate decisions, a federal appellate court upheld the ATS judgment by a 6–5 vote. The Supreme Court agreed to review the decision.41 Sosa reached the Supreme Court at a time of swirling disputes about executive power and the role of the judiciary – if any – in policing that power. During the same term, and decided just one day before Sosa, the Court heard two post-11 September cases involving the president’s power over alleged terrorists and rejected President George W. Bush’s claim to unreviewable power to detain people the government labelled ‘enemy combatants’.42 Sosa raised similar issues involving the constitutional division of powers among the three branches of the federal government: the executive branch, Congress and the judiciary. The Bush administration claimed that the judiciary had no power to hear claims of violations of international law and that only the executive branch could decide if international law norms were enforceable See cases cited in n 46. These facts are detailed in United States v Alvarez-Machaín 504 US 655, 657–70 (1992) and Sosa (n 7) 697–99. 41 Sosa also filed claims against the US government under a separate statute that permits lawsuits against the government in limited circumstances. The Supreme Court rejected the application of the statute to claims arising in a foreign country and dismissed the claim against the US government. Sosa (n 7) 699–711. 42 Rasul v Bush 542 US 466 (2004); Hamdi v Rumsfeld 542 US 507 (2004). 39 40

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The rise and fall of the Alien Tort Statute  53 in US courts. As in the 11 September cases, the Supreme Court in Sosa rejected the excessive claims of executive power and held that the judiciary has the power to recognize a right to sue for a violation of international law even when, as in the ATS, Congress has not explicitly granted such a right and the specific international law norm has not been incorporated into US law by the two elected branches of government. As a statement of judicial power to recognize claims and interpret international law, the majority opinion in Sosa was bold and decisive. The opinion affirmed the basic structure of the ATS as a statute that authorized the courts to recognize claims for violations of international law and left intact the precedents set out in Filártiga and its progeny. It thereby recognized judicial power to determine when such claims could be brought before the courts, rejecting the Bush administration’s effort to restrict the judiciary’s power to afford relief to those injured by human rights violations. As an application of the ATS as a tool for human rights accountability, however, the opinion was decidedly less ambitious. First, the Court read the claim asserted by Alvarez-Machaín in the most narrow way possible, as a brief detention without adequate authorization, before being turned over to lawful authorities for prosecution.43 Not surprisingly, the Court found no consensus that such a minor, technical illegality – akin to a failure to prepare the proper paperwork – violated international law. Second, the Court articulated a number of grounds for caution in recognizing ATS claims, language that later courts cited in narrowing the reach of the ATS. Much of this language addressed the foreign policy concerns raised by ATS claims and the danger that courts would overstep their role and venture into law-making, a role constitutionally assigned to the executive and legislative branches of government. C Post-Sosa Cases: Government Officials and Corporate Defendants Despite the cautionary language in Sosa, the slow expansion of ATS claims continued uninterrupted for close to a decade, as courts continued to accept jurisdiction over claims against both individual and corporate defendants. As before Sosa, claims against former foreign government officials generally proceeded smoothly when the foreign government either took no position on the litigation or affirmatively waived any possible immunity the former official might claim. Successful lawsuits obtained judgments against former officials of several nations, including El Salvador, Chile, Somalia and Haiti.44 However, the courts dismissed two cases against former officials of Israel when, with the support of the US executive branch, the Israeli government asserted immunity on behalf of its former officials.45 During the same period, claims against US government officials continued to see no success. A combination of immunity doctrines protects US officials and the US government from most lawsuits for conduct that has any connection to national security or foreign affairs. In a series of cases, the courts dismissed every ATS claim against the government or government officials. Courts accepted multiple defences from the

Sosa (n 7) 735–38. Many of the successful individual defendant cases were litigated by the Center for Justice and Accountability. Further details are available on the CJA website: accessed 8 June 2018. 45 Belhas v Ya’alon 515 F 3d 1279, 1282 (DC Cir 2008); Matar v Dichter 563 F 3d 9 (2d Cir 2009). 43 44

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54  Research handbook on human rights and business government, including lack of standing, newly imposed pleading requirements, immunity and the government’s assertion that the litigation would expose ‘state secrets’.46 Claims against corporations picked up steam in the post-Sosa years, with advocates relying on the earlier cases upholding the use of the ATS against corporations and the fact that Sosa affirmed the basic approach to the statute adopted in Filártiga. However, relatively few cases proceeded beyond the initial pleadings. As of 2012, most of the approximately 60 corporate-defendant ATS claims filed in US courts in the prior decade had been quickly dismissed, with fewer than two dozen proceeding into discovery.47 As in Unocal, many of the successful cases asserted that the corporation was liable for abuses committed by government forces. Wiwa v Royal Dutch Petroleum Co.,48 for example, alleged that the oil company was responsible for the Nigerian military’s assaults on civilians protesting the oil operations. Similar claims against Exxon Mobil addressed the oil company’s responsibility for violations committed by the Indonesian security forces.49 Corporate and governmental responses to the cases often veered into almost comical exaggeration. A letter filed by the Bush administration in the Exxon Mobil litigation asserted that the case could deter foreign investment in Indonesia, torpedo the Indonesian economy and destabilize the entire region.50 In a case that involved claims of child labour, Judge Posner offered a pithy response to arguments based on the supposed economic harm triggered by human rights litigation: One of the amicus curiae briefs argues, seemingly not tongue in cheek, that corporations shouldn’t be liable under the Alien Tort Statute because that would be bad for business. That may seem both irrelevant and obvious; it is irrelevant, but not obvious. Businesses in countries that have and enforce laws against child labor are hurt by competition from businesses that employ child labor in countries in which employing children is condoned.51

Corporate concerns about ATS litigation – and about litigation in general – took root, however, leading to a steady pushback against corporate-defendant ATS claims.

See Vance v Rumsfeld 701 F 3d 193, 203–05 (7th Cir 2012) (finding allegations were not ‘plausible’); Ali v Rumsfeld 649 F 3d 762, 770–78 (DC Cir 2011) (dismissing on basis of qualified and absolute immunity); Mohamed v Jeppesen Dataplan, Inc 614 F 3d 1070 (9th Cir 2010) (dismissing under state secrets doctrine); Al-Aulaqi v Obama 727 F Supp 2d 1 (DDC 2010) (dismissing for lack of standing). 47 For an overview of the cases filed and their outcomes, see Stephens, Curious History (n 5) 1518–19. 48 226 F 3d 88 (2d Cir 2000) (reversing dismissal on forum non conveniens grounds). Wiwa settled on the eve of trial. Ed Pilkington, ‘Shell Pays Out $15.5m over Saro-Wiwa Killing’ (The Guardian 8 June 2009) accessed 8 June 2018. 49 For an overview of the Exxon Mobil litigation see ExxonMobil lawsuit (Aceh) (Business and Human Rights Resource Centre) accessed 8 June 2018. 50 Letter from William H Taft, Legal Advisor, Dep’t of State at 1, 3–4 (29 July 2002), Doe v Exxon Mobil 393 F Supp 2d 20 (DDC 2005) (No 01-1357). 51 Flomo v Firestone Natural Rubber Co, LLC 643 F 3d 1013, 1021 (7th Cir 2011). 46

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The rise and fall of the Alien Tort Statute  55

V

THE US SUPREME COURT GUTS THE ATS

The near demise of the ATS has been the result of two developments. First, the Supreme Court has issued a number of decisions that limit the role of litigation as a means to vindicate legal rights, particularly litigation against corporate defendants.52 The Court re-interpreted the rules governing pleadings to require plaintiffs to state detailed facts in order to initiate a lawsuit.53 This is particularly problematic when suing a corporation that is likely to control the evidence of its own internal decision-making process. The Court also held that a corporation can only be sued where it is either incorporated or has its principal place of business.54 As a result, a corporation can no longer be sued where it is doing substantial business and foreign corporations generally are not subject to suit in the United States for events that occurred outside the United States. On account of these decisions, ATS claims that would otherwise have survived have been dismissed because the allegations were considered too general or conclusory,55 or because the corporate defendant had insufficient ties to the United States.56 In addition to these general restrictions on litigation, the Supreme Court has specifically targeted the ATS. In two decisions, one issued in 2013 and one in 2018, the Court has so narrowed its interpretation of the statute that it has come close to eliminating ATS litigation completely. Until 2010, litigants, courts and commentators assumed that the ATS applied equally to natural persons and to corporations. US law recognizes that corporations are capable of committing torts and dozens of opinions held that they could be found liable for torts in violation of international law. As one appellate judge wrote, ‘We have repeatedly treated the issue of whether corporations may be held liable under the AT[S] as indistinguishable from the question of whether private individuals may be’.57 In an appellate court decision in Kiobel v Royal Dutch Petroleum Co.,58 however, the Second Circuit Court of Appeals held in 2010 that the ATS does not apply to claims against corporate defendants because international law does not recognize corporate liability for human rights violations. In a strongly worded separate opinion, one member of the three-judge appellate panel argued that federal law, not international law, determines which defendants can be held liable in ATS cases. He also rejected the view that international law does not recognize corporate liability, arguing that international law norms bind corporations to the same extent as natural persons.59

52 Andrew M Siegel, ‘The Court Against the Courts: Hostility to Litigation as an Organizing Theme in the Rehnquist Court’s Jurisprudence’ (2006) 84 Texas L Rev 1097, 1107, 1108 (describing a ‘profound hostility to litigation’ during the years – 1986–2005 – when Rehnquist was Chief Justice); Howard M Wasserman, ‘The Roberts Court and the Civil Procedure Revival’ (2012) 31 Rev Litig 313, 332 (noting the same trend under current Chief Justice Roberts, who assumed office in 2005). 53 Ashcroft v Iqbal 556 US 662 (2009); Bell Atlantic Corp v Twombly 550 US 544 (2007). 54 Daimler AG v Bauman 571 US 117 (2014). 55 Mamani v Berzain 654 F 3d 1148 (11th Cir 2011). 56 Daimler (n 54). 57 Khulumani v Barclay Nat. Bank Ltd 504 F 3d 254, 282 (2d Cir 2007) (Katzmann J concurring). 58 621 F 3d 111 (2d Cir 2010), aff’d on other grounds 133 S Ct 1659 (2013). 59 ibid 179–81 (Leval J concurring).

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56  Research handbook on human rights and business The Second Circuit Kiobel decision was an outlier, as four other appellate courts disagreed and held that the ATS did authorize suits against corporate defendants.60 The Supreme Court agreed to review the Kiobel decision and resolve the corporate accountability issue. After the issue was briefed and argued, however, the Court instructed the parties to address a separate issue, one that had not previously been raised: whether the ATS applies to conduct occurring in the territory of a foreign state.61 The administration of President George W. Bush had raised the issue of the extraterritorial application of the ATS in Sosa in 2004, but the Court ignored the argument, seemingly accepting that the statute applied to events outside the United States.62 In the intervening years, the Supreme Court tightened the presumption against extraterritoriality, holding that statutes should be understood to apply only in the United States unless the language of the statute explicitly provides for extraterritorial application. In the 5–4 Supreme Court decision in Kiobel, the majority applied the presumption against extraterritoriality to hold that the ATS did not apply to events with no connection to the United States, stating that only claims that ‘touch and concern the territory of the United States … with sufficient force’ will ‘displace the presumption against extraterritoriality’.63 The opinion noted that ‘mere corporate presence’ in the United States is not sufficient to overcome the presumption,64 but gave no guidance as to what more would be required. In a concurring opinion, two judges stated that they would have gone further than the majority and would have said that only claims based on human rights violations that occurred within the United States could be raised under the ATS.65 The lower courts, understandably, have had difficulty applying the Kiobel test. Some decisions have required that a violation of international law occur within the United States – although that seems to have been the view of the two concurring judges, not the majority.66 Other courts have applied a more flexible test, recognizing that the US citizenship of a corporate defendant is relevant and that a claim might meet the Kiobel test if some relevant conduct occurred in the United States.67 Only a handful of cases have survived preliminary motions under even the more flexible test. In one case, survivors of torture and other war crimes sued a US corporation that, under contract with the US government, conducted interrogations in Iraq during US-occupation.68 In another, filed against Exxon Mobil Corporation for abuses committed in Indonesia, the court found that the claims satisfied the ‘touch and concern’ test based on detailed allegations of decision-making in the United States.69 Romero v Drummond Co 552 F 3d 1303, 1315 (11th Cir 2008); Flomo v Firestone Natural Rubber Co 643 F 3d 1013 (7th Cir 2011); Doe v Exxon Mobil Corp 654 F 3d 11 (DC Cir 2011); Sarei v Rio Tinto, PLC 671 F 3d 736 (9th Cir 2011). 61 Reargument Order, Kiobel v Royal Dutch Petroleum Co. 132 S Ct 1738 (US 2012). 62 See Brief for the United States as Respondent Supporting Petitioner 46-50, Sosa v Alvarez-Machain 542 US 692 (2004) (No 03-339). 63 Kiobel (n 8). 64 ibid 125. 65 ibid 125–27 (Alito J concurring). 66 See Balintulo v Daimler AG 727 F 3d 174, 192 (2d Cir 2013); Adhikari v Kellogg Brown & Root, Inc 845 F 3d 184, 197 (5th Cir 2017). 67 See Al Shimari v CACI Premier Tech., Inc 758 F 3d 516 (4th Cir 2014). 68 ibid 527. 69 Doe I v Exxon Mobil Corporation 2015 WL 5042118 (D.D.C. 6 July 2015). Additional claims were pending in the lower level courts as of mid-2018. See Aragon v Ku 277 F Supp 3d 1055 (D Minn 60

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The rise and fall of the Alien Tort Statute  57 The second blow to the ATS came in the April 2018 decision in Jesner v Arab Bank,70 when the Supreme Court returned to the question left unresolved in the Court’s Kiobel decision: whether the ATS permits claims against corporate defendants. In Jesner, the Court answered only part of the question, holding that the statute does not authorize suits against foreign corporations but leaving unresolved whether claims against domestic US corporations might be permitted.71 Writing for a five-justice majority in Jesner, Justice Kennedy reviewed the modern application of the ATS, suggesting some scepticism about the Court’s prior decisions and urging a very narrow interpretation of the statute. Applying that cautious approach, he first suggested that no international law norm imposes liability on corporations for acts committed by their employees that violate international human rights norms.72 He then held that even if there were such a norm, the judiciary should not interpret the ATS to apply to foreign corporations because of the sensitive foreign policy issues triggered by foreign corporation cases; such issues, he concluded, should be left to the legislature.73 In the absence of explicit statutory language, the majority concluded, the courts should not apply the ATS to foreign corporations. In dissent, writing for four justices, Justice Sotomayor argued that the ATS requires only that the alleged tort violates international law, while leaving to domestic law the appropriate remedy for that violation, including whether to impose liability on corporations or other artificial entities.74 She also denied that potential ‘diplomatic friction’ requires barring all ATS claims against foreign corporations. Instead, she argued, the courts should consider problems raised by individual cases and decide whether those cases should be dismissed based on more narrowly tailored doctrines, including limitations on personal jurisdiction, exhaustion of remedies, forum non conveniens, international comity, or restrictions on aiding and abetting or other doctrines of secondary liability.75 The Jesner opinions’ broad comments on corporate responsibility offer insight into the justices’ views about corporate accountability for human rights violations. Justice Kennedy repeatedly praised the role corporations play in society, particularly in developing economies where, he wrote, they contribute to economic development and the rule of law.76 But he seemed perversely eager to disconnect corporations from the abuses that they commit, labelling those merely the acts of the people who work for them and questioning whether international law imposes ‘responsibility and liability on a corporation if its human agents use the corporation to commit crimes in violation of international laws that protect human rights’.77 This approach to the corporate entity is particularly striking from a judge who, in the 2010 Citizens United decision, held that corporations have a constitutionally protected right to

2017) (claims involving forced labor within the United States); Estate of Aruto Giron Alvarez v Johns Hopkins Univ 275 F Supp 3d 670 (D Md 2017) (allegations that US researchers conducted nonconsensual experiments in Guatemala, including infecting people with syphilis). 70 Jesner (n 8). 71 ibid 1407 (Kennedy J) (‘[T]he Court holds that foreign corporations may not be defendants in suits brought under the ATS’.). 72 ibid 1399–1402. 73 ibid 1402–07. 74 ibid 1419–27 (Sotomayor J dissenting). 75 ibid 1427–31. 76 ibid 1406, 1408 (Kennedy J). 77 ibid 1393.

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58  Research handbook on human rights and business free speech that is equal to that of natural persons.78 Corporate speech, Kennedy wrote for the majority in Citizens United, ‘does not lose First Amendment protection “simply because its source is a corporation”’:79 By taking the right to speak from some and giving it to others, the Government deprives the disadvantaged person or class of the right to use speech to strive to establish worth, standing, and respect for the speaker’s voice ... The First Amendment protects speech and speaker, and the ideas that flow from each.80

When analysing the right to free speech in Citizens United, Kennedy extolled a corporation’s interest in attaining worth and respect for its views. When he applauded the role that corporations play in developing economies in Jesner, he – in his own terms – recognized their ‘worth’ and ‘standing’ and accorded them the ‘respect’ that they deserve. But when a corporation was accused of human rights violations, he suddenly shifted in Jesner to portraying corporations not as full participants in society, but rather as shells that are not responsible for the acts of their human agents. Justice Sotomayor in Jesner took a very different view of the corporation and its role in human rights violations: In categorically barring all suits against foreign corporations under the ATS, the Court ensures that foreign corporations – entities capable of wrongdoing under our domestic law – remain immune from liability for human rights abuses, however egregious they may be. Corporations can be and often are a force for innovation and growth. Many of their contributions to society should be celebrated. But the unique power that corporations wield can be used both for good and for bad ... Immunizing corporations that violate human rights from liability under the ATS undermines the system of accountability for law-of-nations violations that the First Congress endeavored to impose. It allows these entities to take advantage of the significant benefits of the corporate form and enjoy fundamental rights, without having to shoulder attendant fundamental responsibilities.81

By contrast, the rhetoric and reasoning of the majority are yet another sign of a legal system trending towards empowering corporations while limiting corporate accountability. Even before Jesner, the Court had sharply decreased ATS litigation against foreign corporations, through limits on personal jurisdiction and the Kiobel presumption against extraterritoriality. Jesner’s holding that the ATS does not permit claims against foreign corporations will eliminate some of the handful of cases that had survived those hurdles. Corporate-defendant ATS claims are permissible after Jesner and Kiobel only against domestic corporations and only for claims that ‘touch and concern’ the United States. But, as noted earlier, the Supreme Court has yet to clarify just how much US conduct is necessary to meet the ‘touch and concern’ test. Some courts apply the statute only where the human rights violation occurred in the United States. Others look more generally at the conduct leading to the violation and consider relevant the US citizenship of the defendant. Very few claims will satisfy even this broader test.

80 81 78 79

Citizens United v Fed. Election Comm’n 558 US 310 (2010). ibid 342 (quoting First Nat’l Bank of Boston v Bellotti 435 US 765 (1978)). ibid 340–41. Jesner (n 8) 1436–37 (Sotomayor J dissenting) (citations omitted).

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The rise and fall of the Alien Tort Statute  59

VI

THE LEGACY OF ATS CORPORATE–DEFENDANT LITIGATION

Although the Supreme Court has largely gutted the ATS, the 20 years of US corporate-defendant ATS litigation have had an impact in multiple ways. To begin, specific cases benefited both the plaintiffs and their communities. Several lawsuits resulted in settlements for the plaintiffs. As noted earlier, the Unocal case settled, reportedly for $30 million.82 In another case, plaintiffs settled claims against a drug company, reportedly for $75 million, in compensation for damages associated with medical trials in Nigeria conducted without adequate consent.83 Settlements contribute to the individual recipients and, often, to their communities as well. Although financial compensation is important, money is rarely the primary goal of plaintiffs in human rights litigation. Most seek to expose the abuses that they, their families and their communities suffered. Litigation is well-designed to focus attention on events that the media all too often largely ignore. Lawsuits in the United States often attract attention that is otherwise difficult to obtain, leading to scrutiny from governments and public interest organizations in the United States and in the country where the abuses took place, as well as from international organizations. The publicity and other attention generated by litigation often goes beyond drawing attention to the facts of a specific case. The focus on corporate human rights abuses raises consciousness about the problem. Even unsuccessful litigation may shed light on industry practices that abuse human rights and may make such abuses less likely in the future. Within the United States, the ATS model also helped spur enactment of focused US statutes that permit claims against corporate defendants for specific claims. The Anti-Terrorism Act, enacted in 1994, permits US nationals to sue for damages caused ‘by reason of an act of international terrorism’ and authorizes suits against corporations as well as individual defendants.84 The Trafficking Victim Protection Act, first enacted in 2000, also permits claims for damages against corporate defendants.85 With the gutting of ATS corporate-defendant litigation, survivors of abuse and human rights advocates are likely to rely on state, rather than federal, law for claims that do not fit within one of the specific statutes. Common law torts such as wrongful death and assault, for example, encompass claims of summary execution and torture. In one state, California, corporate accountability advocates successfully lobbied the state legislature to extend the statute of limitations for certain torts when the underlying conduct constitutes torture, genocide, a war

Magnusson (n 2). For reports about the settlement amount in Abdullahi v Pfizer, Inc 562 F 3d 163 (2d Cir 2009), see Joe Stephens, ‘Pfizer Reaches Settlement Agreement in Notorious Nigerian Drug Trial’ (Washington Post 4 April 2009) accessed 6 June 2018. 84 18 USC §§ 2331–2338. The provision has been used primarily against Palestinian organizations or against defendants accused of involvement in the 11 September 2001 attacks. See Boim v Holy Land Found. for Relief & Dev 549 F 3d 685 (7th Cir 2008) (suit against individuals and organizations for financial assistance to group held responsible for killing US citizen in Israel); In re Terrorist Attacks on September 11, 2001 714 F 3d 659 (2d Cir 2013) (upholding claims against defendants accused of bearing responsibility for attack). 85 22 USC §§ 7101–7114. 82 83

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60  Research handbook on human rights and business crime, extrajudicial killing or a crime against humanity.86 Advocates can base environmental claims on state negligence and nuisance laws, as in a lawsuit filed in the United States against the International Finance Corporation – the lending arm of the World Bank – for funding construction of a power plant in India that led to entirely foreseeable harms to the local community.87 While state law claims face hurdles such as short statutes of limitations, they also have legal advantages: for example, although the international definition of torture requires a link to government authority, the tort of assault does not. A corporation responsible for torture could, therefore, be sued for assault under facts that might not support a claim for torture. Outside the United States, ATS litigation has provided a model for similar cases in other countries, based on both domestic law and international law claims. In the absence of international mechanisms to challenge corporate activities, advocates for corporate accountability increasingly have sought to use domestic legal systems to hold corporations accountable for human rights violations. The US model built upon unusual features of the US legal system, including the successful ATS litigation against individuals and flexible doctrines of liability that permitted claims for knowingly providing assistance to perpetrators of human rights violation. In other legal systems, human rights litigators have sought to frame claims against corporate defendants in ways that fit within their domestic systems’ legal structures.88 Although US lawsuits against corporations were once outliers, those impacted by corporate abuses have turned to domestic courts in other countries in increasing numbers. A website that tracks such litigation now includes profiles of almost 150 cases that represent just a sample of the litigation underway in domestic legal systems around the world.89 ATS corporate-defendant litigation is part of a global movement seeking means to hold corporations accountable for human rights violations and should be understood as both a product of and an impetus to that movement. The international movement drew attention to corporate human rights violations, some of which then became the basis for ATS litigation. The legal theories and fact investigations developed by activists around the world helped US lawyers develop ATS claims. And the attention and legal victories garnered by the US litigation fuelled the international movement for corporate human rights accountability. Corporate ATS litigation has impacted another audience: corporations themselves. The fear of being sued certainly draws the attention of corporate executives as well as corporate lawyers and triggers multiple concerns. The risk of human rights litigation increases corporate atten86 See ‘Landmark Human Rights Law Passed in California’ (International Corporate Accountability Roundtable 6 October 2015) accessed 6 June 2018. 87 Jam v International Finance Corp 860 F 3d 703 (DC Cir 2017), litigated by EarthRights International, was dismissed by the lower federal courts based on a finding that the IFC was absolutely immune from suit. This decision was, however, reversed by the US Supreme Court in Jam v International Finance Corp 139 S Ct 759 (2019). The underlying tort issues have not been addressed by the courts. For details, see Budha Ismail Jam, et al v IFC (EarthRights, Inc.) accessed 6 June 2018. 88 In an analysis of individual defendant human rights litigation, I called this process of adapting claims to differing legal systems ‘translation’. Beth Stephens, ‘Translating Filártiga: A Comparative and International Law Analysis of Domestic Remedies for International Human Rights Violations’ (2002) 27 Yale J Intl L 1. 89 See ‘Complete List of Cases Profiled’ (Business and Human Rights Resource Centre) accessed 6 June 2018.

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The rise and fall of the Alien Tort Statute  61 tion to human rights practices, leading to internal corporate reviews of potential legal liability. Corporations also fear that media exposure will have consequences for the corporation, its reputation and its bottom line. In response to ATS corporate-defendant litigation, corporations have hired human rights consultants, created compliance offices and internal grievance mechanisms and participated in industry-wide networks to establish human rights standards. Another concern triggered by human rights litigation is that increased awareness of human rights abuses will lead to new government regulation, both in domestic law and in international forums. Corporations have engaged with multiple international efforts to establish international human rights principles. Some of that engagement involved heavy-handed lobbying against proposals for binding international standards to regulate corporate behaviour, as when corporate opposition scuttled a set of norms developed in 2003 by a subcommittee of the then UN Human Rights Commission.90 The Human Rights Commission rejected the draft norms but, under pressure from the human rights community, named a Special Rapporteur to study international law constraints on corporate behaviour. That process led to the Human Rights Council’s adoption of the Guiding Principles on Business and Human Rights that state that corporations should respect human rights, although unclear about the source, if any, of a corporate legal obligation to do so.91 The multi-year project to develop the Guiding Principles included extensive corporate participation. More recently, corporations have participated in ongoing debates about drafting a new treaty on business and human rights. A proposed draft of the treaty includes provisions guaranteeing access to courts to present claims for corporate violations of human rights.92 Corporate decisions to participate in international debates about business and human rights reflect many factors, of course. Fear of litigation in domestic courts, however, is doubtless one of those factors. Although ATS claims are now largely off the table, the diverse cases in legal systems around the world can have a similar impact on corporate behaviour.

VII CONCLUSION The almost complete evisceration of the ATS by the US Supreme Court was one of several restrictions on litigation against corporations imposed over the past two decades. Similar skirmishes took place internationally, as survivors of human rights abuses and their advocates sought mechanisms to hold corporations accountable and corporations fought to minimize or avoid liability. What is left of the ATS is of only limited value as a tool to hold corporations

Norms on the Responsibilities of Transnational Corporations and other Business Enterprises with Regard to Human Rights, Comm’n on Hum Rts, Subcomm, 55th Sess, UN Doc E/CN.4/Sub.2/2003/12/ Rev.2 (13 August 2003). The norms stated that corporations as well as states were bound by international human rights obligations. They included prohibitions of human rights atrocities, such as genocide and torture, along with social and economic obligations, such as the duty to ‘contribute to realization’ of rights including access to adequate food and water, health, housing and education. 91 See Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework, Human Rights Council, UN Doc A/HRC/17/31 (21 March 2011) (Principle 11). 92 Revised Legally Binding Instrument to Regulate, in International Human Rights Law, the Activities of Transnational Corporations and Other Business Enterprises, arts 4 and 6 (16 July 2019). 90

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62  Research handbook on human rights and business accountable for human rights violations. But the legacy of ATS litigation survives in the multiple efforts, on multiple fronts, to find a path to increased human rights accountability.

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4. The social construction of the UN Guiding Principles on Business and Human Rights John Gerard Ruggie1

I INTRODUCTION The United Nations Human Rights Council (HRC) unanimously endorsed the Guiding Principles on Business and Human Rights (Guiding Principles) in June 2011.2 To date, they constitute the only official guidance the HRC and its predecessor, the Commission on Human Rights, have issued for states and business enterprises in relation to business and human rights. And this was the first time that either body had “endorsed” a normative text on any subject that governments did not negotiate themselves. UN High Commissioner for Human Rights, Zeid Ra’ad Al Hussein, describes the Guiding Principles as “the global authoritative standard, providing a blueprint for the steps all states and businesses should take to uphold human rights.”3 According to Arvind Ganesan, who directs business and human rights at Human Rights Watch, as recently as the late 1990s “there was no recognition that companies had human rights responsibilities.”4 Needless to say, many factors contributed to this shift, particularly escalating pressure from civil society and adversely affected populations. But in terms of putting a global standard in place, The Economist Intelligence Unit has judged HRC endorsement of the Guiding Principles to be the “watershed event.”5 The Guiding Principles are built on a three-pillar “Protect, Respect and Remedy” framework: (1) states have a duty to protect against human rights abuses by third parties, including business, through policies, regulation, legislation, and effective enforcement; (2) business enterprises have an independent responsibility to respect human rights: that is, to avoid people’s human rights being harmed through their activities or business relationships, and to address harms that do occur; (3) where human rights are harmed, affected individuals and communities should have access to effective remedy, and both states and enterprises have a role to play in enabling this to occur. There are 31 Principles in all, each with commentary elaborating 1 For their helpful comments on an earlier draft, I am grateful to Rachel Davis, Surya Deva, Martha Finnemore, Peter Katzenstein, Amy Lehr, Caroline Rees, John Sherman, John Tasioulas and Francis West. 2 For the full text, see United Nations, Office of the High Commissioner for Human Rights, ‘Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework’ (2011) http://​www​.ohchr​.org/​Documents/​Publications/​Gui​ding​Prin​ciples​Bus​ iness​HR​_EN​.pdf accessed 8 June 2017. 3 Z Ra’ad Al Hussein, ‘Ethical Pursuit of Prosperity’, The Law Society Gazette (23 March 2015) http://​www​.lawgazette​.co​.uk/​analysis/​comment​-and​-opinion/​ethical​-pursuit​-of​-prosperity/​5047796​ .fullarticle accessed 8 June 2017. 4 Quoted in The Economist Intelligence Unit, ‘The Road from Principles to Practices: Today’s Challenges for Business in Respecting Human Rights’ (13 October 2015) https://​www​.eiuperspectives​ .economist​.com/​strategy​-leadership/​road​-principles​-practice accessed 8 June 2017. 5 ibid.

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64  Research handbook on human rights and business its meaning and implications for law, policy, and practice. They encompass all internationally recognized rights, and apply to all states and all business enterprises. They do not by themselves create new legally binding obligations but derive their normative force through their endorsement by states and support from other key stakeholders, including business itself. Yet elements of them have already been incorporated into binding regulation and law. As the author of the Guiding Principles, I naturally take some pride in their achievement.6 Yet when I presented the Guiding Principles to the HRC for its consideration I stated frankly that they do not mark the end of business and human rights challenges, or even the beginning of the end. “But Council endorsement of the Guiding Principles will mark the end of the beginning, by establishing a common global platform for action, on which cumulative progress can be built, step-by-step, without foreclosing any other promising longer-term developments.”7 The Guiding Principles have generated a burgeoning academic literature.8 And by now there are several years of practical experience to inform the debate. But the conceptual and theoretical understanding of global rulemaking that informed my development of the Guiding Principles, and to which I have contributed as a scholar, has not been fully articulated and debated. This chapter aims to close that gap, on the supposition that those ideas might have contributed to the Guiding Principles’ relative success where previous efforts failed, and that in some measure they may be applicable in other complex and contested global policy domains. The chapter is organized into six sections, including this Introduction. Section II highlights some of the broad systemic factors that shaped the global economy and polity from the 1990s into the mid-2000s, the peak of the most recent wave of globalization. Section III summarizes the key features of two very different UN-based initiatives proposed around the turn of the century, both seeking to better protect human rights from corporate harm: the “Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights” (Norms), and the UN Global Compact. Section IV outlines and illustrates the conceptual constructs underlying the development of the Guiding Principles, while Section V does the same for their dissemination and implementation. Section VI, the Conclusion, offers some reflections on the Guiding Principles’ experience for this and possibly other complex and contested domains of global rulemaking.

6 From 2005 to 2011, I served as the UN Secretary-General’s Special Representative for Business and Human Rights. 7 Presentation of Report to United Nations Human Rights Council, Professor John G Ruggie, Special Representative of the Secretary-General for Business and Human Rights, Geneva (30 May 2011) http://​www​.ohchr​.org/​Documents/​Issues/​TransCorporations/​HRC​%202011​_Remarks​_Final​_JR​ .pdf accessed 8 June 2017. 8 See, for example, Radu Mares (ed), The UN Guiding Principles on Business and Human Rights: Foundations and Implementation (Martinus Nijhoff 2012); Surya Deva and David Bilchitz (eds), Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect? (CUP 2013); Dorthee Baumann-Pauly and Justine Nolan (eds), Business and Human Rights: From Principles to Practice (Routledge 2016); César Rodríguez-Garavito (ed), Business and Human Rights: Beyond the End of the Beginning (CUP 2017). The Guiding Principles have also featured in debates among moral philosophers on the conceptual and normative questions raised by international human rights law. See, for example, Allen Buchanan, The Heart of Human Rights (OUP 2013); John Tasioulas, ‘Exiting the Hall of Mirrors: Morality and Law in Human Rights (2017); King’s College London Dickson Poon School of Law, Legal Studies Research Paper Series: Paper No 2018-19.

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The social construction of the UN Guiding Principles on Business and Human Rights  65

II

THE CONTEXT

This section highlights three broad systemic factors that I saw shaping global rulemaking in the early twenty-first century, including in relation to business and human rights. A Geoeconomic/Geopolitical In 1982 I published a scholarly article that introduced the concept of embedded liberalism into the field of international political economy.9 It explained how the capitalist countries learned to reconcile the efficiency and joint gains of markets with broader social norms and institutional practices that markets themselves require in order to thrive and survive. I adapted the term from Karl Polanyi’s magisterial work, The Great Transformation, published in 1944.10 The transformation was a long and painful journey. In stylized form, this was the essence of the embedded liberalism compromise: after World War II the commitment to international liberalization was institutionally coupled with norms and practices protecting national social communities. Governments played a key role in enacting and sustaining it: on the one side, re-establishing a multilateral monetary and trade regime and progressively removing barriers to trade; on the other side, providing domestic social investments and safety nets, while moderating the volatility of cross-border transaction flows by, for example, requiring capital controls to prevent destabilizing flows of “hot money,” and allowing for temporary safeguards against sudden surges in imports. Reconciling these two competing policy objectives—open international markets and domestic economic and social stability—required delicate national and international balancing acts, which took different forms in different countries: social democracy, the social market economy, and the New Deal state. In the industrialized world, this grand bargain formed the basis of one of the longest and most equitable periods of economic expansion in history.11 At the time I wrote the article the “new protectionism” was all the rage among political economists: the belief that the interventionist and social protection component of the embedded liberalism compromise was eroding international economic openness.12 The alleged decline of American hegemony was the favored explanation.13 Permanent US balance of payments deficits could no longer sustain the link between the dollar and monetary gold backing it, thereby forcing the world onto a US paper standard, while the US vigorously “encouraged” countries John Gerard Ruggie, ‘International Regimes, Transactions and Change: Embedded Liberalism in the Postwar Economic Order’ [1982] International Organization 379. 10 Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (Beacon 1944). 11 In a detailed statistical analysis, Salvatore Pitruzzello demonstrates that post-Second World War embedded liberalism in the OECD countries generated better long-term economic performance and social protection than its nineteenth-century laissez-faire predecessor. Pitruzzello, ‘Trade Globalization, Economic Performance, and Social Protection: Nineteenth-Century British Laissez-Faire and Post-World War II U.S.-Embedded Liberalism’ in John Gerard Ruggie (ed), Embedding Global Markets: An Enduring Challenge (Ashgate 2008). 12 For example, Melvyn B Krauss, The New Protectionism: The Welfare State in International Trade (NYU Press 1978). 13 For example, Robert O Keohane, ‘The Theory of Hegemonic Stability and Changes in International Economic Regimes, 1967–1977’ in Ole Holsti et al (eds), Change in the International System (Westview 1980). 9

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66  Research handbook on human rights and business such as Japan to adopt “voluntary” export controls, hoping to slow the rate of increase of imports into the US of consumer electronic products, steel and automobiles in particular. However, my article concluded on a strikingly different note: “the foremost force for discontinuity at present is not ‘the new protectionism’ in money and trade but the resurgent ethos of liberal capitalism.”14 Apart from believing that reports of America’s economic decline were greatly exaggerated, as Mark Twain said of his reported death, my theoretical argument suggested that the embedded liberalism compromise was most likely to unravel as a result of a shift in the social purpose of the state vis-à-vis the market, from the domestic compensatory role it had played to buffer the dislocations resulting from international openness, toward some newer form of more unrestrained reliance on market mechanisms. As if on cue, the elections of Margaret Thatcher in 1979 and Ronald Reagan in 1980 promised to embark on just such a shift. The phenomenon whose rise I had predicted subsequently came to be known as neoliberalism, which in important respects evolved into the dominant ideational and institutional template of economic governance in the 1990s.15 The literature on neoliberalism is vast, and the phenomenon itself remains highly contested. It is not my aim to rehearse or assess the debate here, but merely to note several factors relevant to our discussion, beginning with the multinational enterprise. Raymond Vernon, a pioneer in the study of multinationals going back to the 1970s, published a book in 1998 entitled In the Hurricane’s Eye: The Troubled Prospects of Multinational Enterprises. His decision to write the book, he states in the preface, “grew out of a sense that the world was slipping into a period in which the inescapable clashes between multinational enterprises and nation-states might be growing in frequency and intensity, evoking responses from both the public and the private sectors that would substantial[ly] impair their performance.”16 Yet today the multinational enterprise is the standard mode of organizing economic activities across countries. From 1991 to 2001, some 94 percent of all national regulations related to foreign investment that were modified across the world were intended to further facilitate it.17 Nike was one of the first US manufacturing companies to completely offshore production: starting in Japan in the 1970s, shifting to South Korea and Taiwan in the early 1980s, and, when the cost model there came under pressure, convincing its Korean and Taiwanese suppliers to set up shop elsewhere in Asia, including Indonesia and Vietnam. China entered the World Trade Organization in December 2001, and soon became a leading global manufacturing platform. China launched its “going out”—or foreign investment— policy in 2001, and subsequently became a major home country of multinational enterprises, as to a lesser extent did Brazil, India, and South Africa. Complex value chains linked increasingly dispersed production as well as the delivery of professional and other services. Extractive firms sought new sources of oil, gas, and minerals in ever more challenging operating contexts. Saskia Sassen observed in 2006 that a fundamental transformation had taken place in the social purpose of national economic policy: “In earlier periods, including Bretton

Ruggie (n 9) 413. Colin Crouch, The Strange Non-Death of Neoliberalism (Polity 2011). 16 Raymond Vernon, In the Hurricane’s Eye: The Troubled Prospects of Multinational Enterprises (Harvard 1998) vii–viii. 17 UNCTAD, World Investment Report 2002 (Geneva 2002) 7. 14 15

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The social construction of the UN Guiding Principles on Business and Human Rights  67 Woods, [the organizing logic of economic policymaking] was geared toward building national states; in today’s phase, it is geared toward building global systems.”18 One striking consequence is that “about 80% of global trade (in terms of gross exports) has become linked to international production networks of TNCs [transnational corporations].”19 And perhaps as many as one out of seven jobs in the world is in the supply chains of multinationals, not counting informal work.20 Thus, as national economies have become more open, an ever-greater share of production and trade has become internalized within the networks of 80,000 or so multinationals and parties related to them through equity ties or contracts. Yet, at the global level, shared values and institutional procedures to embed such economic forces and actors remained weak, and in some respects are getting weaker. B

Legal and Institutional Fragmentation

The fragmentation of global policy- and law-making was becoming equally clear in the late 1990s. In a study of what they call the “stagnation” of public international law, Pauwelyn, Wessel, and Wouters make this observation: The 1990s may represent the apex of formal and legalized international law and organization: end of the cold war; reactivation of the UN Security Council; 1992 Rio Conference; entry into force of the Law of the Sea Convention; creation of the WTO and the Energy Charter in 1994; unlimited extension in time of the Nuclear Non-Proliferation Treaty in 1995; 1997 Kyoto Protocol; 1998 Rome Statute. The turn of the century, in contrast, represents a breaking point.21

The number of new multilateral treaties has since declined; fewer have been deposited with the United Nations in each of the past two decades than in earlier decades. Even the number of new investment treaties has been declining. Similar trends exist at regional levels. Many factors lay behind this growing fragmentation in global public rulemaking.22 Three are particularly pertinent to the present discussion. The first is that geoeconomic changes were accompanied by geopolitical shifts, which often are felt first in consensus-based international organizations like the United Nations. Emerging powers, with diverse national interests and reflecting different domestic economic, legal, and political systems, began to project greater influence in multilateral forums, making coalition building and consensus seeking more difficult. A second and partly related factor is what some have called the rise of networked governance: essentially self-constituting transnational public or private governance arrangements, focused on specific policy problems.23 Typically these were begun by a limited number of Saskia Sassen, Territory, Authority, Rights: From Medieval to Global Assemblages (Princeton University Press 2006) 16. 19 UNCTAD, World Investment Report 2013 (Geneva 2013) 135. 20 International Labour Organization, Decent Work in Global Supply Chains (Report prepared for 105th Session, International Labour Conference 8 April 2016) http://​www​.ilo​.org/​ilc/​ILCSessions/​105/​ reports/​reports​-to​-theconference/​WCMS​_468097/​lang​-​-en/​index​.htm accessed 8 June 2017. 21 Joost Pauwelyn et al, ‘When Structures Become Shackles: Stagnation and Dynamics in International Lawmaking’ [2014] European Journal of International Law 733. 22 ibid, especially 739. 23 For example, Anne-Marie Slaughter, A New World Order (Princeton University Press 2004); Thomas Hale and David Held (eds), Handbook of Transnational Governance (Polity 2011); Tim Bűthe 18

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68  Research handbook on human rights and business countries or private standardsetting bodies with the greatest influence in a particular issue who wished to avoid working through larger, more diverse and more cumbersome multilateral bodies. Examples include the Basel Committee on Banking Supervision, Financial Action Task Force, Financial Stability Board, International Accounting Standards Board, and Proliferation Security Initiative, among many others.24 Moreover, even as the domain of public international law languished, private international law was expanding rapidly, generating a new lex mercatoria.25 One example is commercial arbitration, and the adaptation of this model to investor/ state disputes under bilateral investment treaties and host-government agreements. A third factor is the sheer substantive complexity of global issues, coupled with the extensive interest diversity across and even within states that many exhibit. Climate change is an archetype of the growing number of “wicked problems.” These are defined as “large scale social challenges caught in causal webs of interlinking variables spanning national boundaries that complicate both their diagnosis and prognosis.”26 When we do see collective responses by states in the face of such problems they tend to take the form, not of a single comprehensive governing regime for an entire issue-area, but of separate and typically uncoordinated fragments that are said to make up “regime complexes.”27 In the area of global environmental policy, Keohane and Victor conclude that “it is prohibitively difficult to arrange all couplings [among the individual fragments] ex ante into a single comprehensive regime.”28 C

Scale Mismatches

The case of climate change illustrates one type of scale mismatch: the effects are global, but the authority to deal with them remains largely in the hands of national governments. We see a different kind of scale mismatch in the case of business and human rights. Even as the realm of global public rulemaking has trended to fragmentation, multinational enterprises are a major global economic integrative force, as noted above. However, while in the every-day world multinationals such as Nike, Google, Coca-Cola, Toyota, Novartis, and Sinopec are known to be one enterprise, with unity of command, operating under a single global vision and and Walter Mattli, The New Global Rulers: The Privatization of Regulation in the World Economy (Princeton University Press 2011). 24 In part, external fragmentation reflects fragmentation within the same government. For example, US Secretary of State Rex Tillerson attributed part of his failure to broker a deal between Gulf nations and Qatar in July 2017 to the ‘fragmented’ decisionmaking of the US government, which he compared unfavorably to the ‘highly structured’ process in ExxonMobil, of which he had been CEO. Gardner Harris, ‘Qatar Feud Defies Efforts By Tillerson to Unite Gulf’ New York Times (14 July 2017). 25 A Claire Cutler, Private Power and Global Authority: Transnational Merchant Law in the Global Political Economy (CUP 2003); Gralf-Peter Calliess and Peer Zumbansen, Rough Consensus and Running Code: A Theory of Transnational Private Law (Hart 2012); John Gerard Ruggie and John F Sherman III, ‘Adding Human Rights Punch to the New Lex Mercatoria: The Impact of the UN Guiding Principles on Business and Human Rights on Commercial Legal Practice’ [2015] Journal of International Dispute Settlement 455. 26 Juliane Reinecke and Shaz Ansari, ‘Taming Wicked Problems: The Role of Framing in the Construction of Corporate Social Responsibility’ [2016] Journal of Management Studies 299. 27 Frank Bierman et al, ‘The Fragmentation of Global Governance Architectures: A Framework for Analysis’ [2009] Global Environmental Politics 14; Robert O Keohane and David Victor, ‘The Regime Complex for Climate Change’ [2011] Perspectives on Politics 7; Amandine Orsini et al, ‘Regime Complexes: A Buzz, a Boom, or a Boost for Global Governance?’ [2013] Global Governance 27. 28 ibid, Keohane and Victor, 13.

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The social construction of the UN Guiding Principles on Business and Human Rights  69 strategy, optimizing worldwide operations for efficiencies, market share, and profits, they are not generally recognized as such in public law. National law, with some exceptions, governs whatever separate legal entity may be incorporated within a particular national jurisdiction, not the multinational enterprise as a whole. Thus, a parent company enjoys separate legal personality and limited liability for harm caused by its subsidiaries even if it is their sole owner. International law may “contemplate” multinational enterprises, as Knox has put it, and in some instances even “specify” appropriate conduct, as ILO labor conventions for example clearly do. But it generally imposes correlative duties on states, not on companies directly.29 Thus, Larry Catá Backer concludes, in a masterful understatement: “from a public law perspective, the framework for the regulation of multinational enterprises can be viewed most charitably as in flux.”30 These factors—geoeconomic/geopolitical shifts, the fragmentation of international law and global governance arrangements, and scale mismatches—continue to shape and reshape both the context and outputs of global rulemaking. They have made advancing the business and human rights agenda both more pressing and yet also more difficult to achieve through the formal intergovernmental governance system.

III

LAW AND LEARNING

As we saw above, Nike was an early mover in offshoring production. It was also an early target of campaigns against abusive workplace practices in the overseas factories that produced its athletic footwear and apparel. Indeed, a perfect storm of bad publicity enveloped Nike throughout much of the 1990s.31 In response, Nike established a Corporate Responsibility Department and adopted a supplier code of conduct and factory audits. Shell followed a corresponding trajectory in Nigeria. Years of destructive environmental practices, including massive oil spills and permanent gas flaring that affected people’s health and their ability to sustain their livelihoods from farming and fishing, generated mounting protests by the Ogoni people in the Niger Delta. As protests escalated and some became violent, Shell temporarily withdrew from its concession in Ogoniland. The Nigerian military junta then began a massive crackdown against the Ogoni, reportedly killing some 2,000.32 Shell ultimately lost its concession in Ogoniland. In 1995, a military tribunal in a sham trial sentenced Ken Saro-Wiwa, the leader of the Ogoni movement, and eight of his colleagues to hang. Political leaders in Africa and elsewhere called for clemency and pressured Shell to use its leverage. Shell merely issued a meek statement that it was not its role to get involved with governments. Following what Mark Moody-Stuart, who later became Shell’s chairman, describes as its annus horribilis in 1995, Shell revised its business principles. The new principles included “the right and the responsibility” of Shell companies to make their positions known to governments “on any matter which affects themselves, their employees, their customers, or their shareholders [as

John H Knox, ‘Horizontal Human Rights Law’ [2008] American Journal of International Law 1. Larry Catá Backer, ‘Multinational Corporations as Objects and Sources of Transnational Relations’ (2007–08) ILSA Journal of Comparative and International Law 499, 507. 31 John Gerard Ruggie, Just Business: Multinational Corporations and Human Rights (Norton 2013). 32 ibid, 9–14. 29 30

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70  Research handbook on human rights and business well as] on matters affecting the community where they have a contribution to make.”33 Also included was the responsibility “to express support for fundamental human rights in line with the legitimate role of business.” In short, Nike and Shell both discovered the hard way that having a legal license to operate by itself was insufficient to ensure the social sustainability of their operations. Major multinationals across a broad array of sectors adopted codes of conduct in the 1990s, together with supply chain audits and other forms of monitoring. A corporate social responsibility (CSR) movement and industry began to blossom. Nike and Shell became the CSR leaders of that period. According to an academic handbook on CSR, its “phenomenal rise” reflects a journey “that is almost unique in the pantheon of ideas in the management literature.”34 Two quite different UN-based initiatives entered the fray in 1999: the drafting of the “Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights” and the UN Global Compact. They developed independently, and at the outset with limited awareness of one another. A

The Norms

The initiative to develop the Norms, a treaty-like text, reflected a deeply held belief in much of the human rights community that legally binding instruments are the most—if not the only— effective tool to regulate international business conduct. CSR is viewed as little more than self-interested self-regulation, designed to burnish the reputation of companies, limit external pressure, and thereby diminish the prospects of “hard” regulatory measures without providing adequate accountability and remedy. The Norms were drafted under the auspices of the then UN Sub-Commission on Human Rights, a subsidiary body of the Commission on Human Rights, composed of 26 experts nominated by governments but serving in their personal capacity. The Norms’ most far-reaching feature was their intent to impose human rights obligations on business enterprises directly under international law, thereby holding them to single global standards. Moreover, within enterprises’ “sphere of influence” the Norms attributed to them essentially the same general obligations that states have under human rights treaties they have ratified: “to promote, secure the fulfillment of, respect, ensure respect of and protect” human rights.35 The specific standards enumerated in the text were drawn from existing international human rights and humanitarian law, supplemented by others that the drafters thought to be particularly relevant to business, such as consumer and environmental protection. Under the Norms, businesses were to be monitored and required to report and to pay reparations to victims. Of course, for the Norms to take legal effect, states would have to adopt them as a treaty or otherwise widely incorporate them into national law. While human rights groups were strongly supportive, the Norms had few if any champions among governments and were vehemently opposed by international business organizations.36 In 2004, when the text was presented for adoption to the Commission, composed of governmental representatives, the

Mark Moody-Stuart, Responsible Leadership: Lessons from the Front Line of Sustainability and Ethics (Greenleaf 2014) 256–57. 34 A Crane et al (eds), The Oxford Handbook of Corporate Social Responsibility (OUP 2008) 3. 35 For the text, see http://​hrlibrary​.umn​.edu/​links/​norms​-Aug2003​.html accessed 8 June 2017. 36 Ruggie (n 31) 47–55. 33

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The social construction of the UN Guiding Principles on Business and Human Rights  71 Commission reacted coolly. It thanked the Sub-Commission for its “work” but not the product. It granted that the text contained “useful elements and ideas” but added that the Commission had not requested it, that it had no legal standing, and that the Sub-Commission should not undertake any monitoring of corporate conduct.37 This outcome undoubtedly suited business interests. But the Norms also had serious foundational flaws, such as intermingling state and corporate obligations while providing no boundaries for the latter, which concerned states as well as businesses.38 B

The Global Compact

The other major UN initiative to address corporate conduct begun in 1999, the Global Compact, followed a different script. Initially it was intended to be merely a challenge by then UN Secretary-General Kofi Annan to the global business community, delivered in a keynote address at the annual meeting of the World Economic Forum in Davos. Promoting business support for UN norms in the area of human rights, labor standards, and the environment, he stated: “you can use these universal values as the cement binding together your global corporations, since they are values people all over the world will recognize as their own.”39 Moreover, he added, UN agencies active in those areas stand ready to help in return. As Annan’s Assistant Secretary-General for Strategic Planning, he tasked me, along with Georg Kell, a staff member with a background in international investment issues, to draft the Davos speech. The overall framing of the initiative was drawn from the embedded liberalism concept. As Annan stated at Davos: Globalization is a fact of life. But I believe we have underestimated its fragility. The problem is this. The spread of markets outpaces the ability of societies and their political systems to adjust to them, let alone to guide the course they take. History teaches us that such an imbalance between the economic, social and political realms can never be sustained for very long … The industrialized countries learned that lesson in their bitter and costly encounter with the Great Depression … Our challenge today is to devise a similar Compact on the global scale, to underpin the new global economy.40

No one has gained as much from globalization, or has so much to lose, Annan continued, than global business. “Don’t wait for every country to introduce laws,” he added. “You can uphold human rights and decent labor and environmental standards directly, by your own conduct of your own business.”41 The reaction to the speech was so positive that Annan felt obliged to create a program, with one full-time staff member and an initial budget of $10,000. Kell and I were tasked with its design; he subsequently became the Compact’s Executive Director. Although the Compact has been criticized virtually from the outset for being a weak regulatory instrument, it was never

37 UN Human Rights Commission Resolution 2004/11 (U.N. Doc. E/CN.4/2004/L.73/Rev.1, 20 Aprile 2004). 38 Ruggie (n 31) chapter 2. 39 United Nations, ‘Secretary-General Proposes Global Compact on Human Rights, Labour, Environment in Address to World Economic Forum in Davos,’ Press Release (SG/SM/6881, 1999) http://​www​.un​.org/​press/​en/​1999/​19990201​.sgsm6881​.html accessed 8 June 2017. 40 ibid. 41 ibid.

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72  Research handbook on human rights and business intended to regulate.42 From the start, it was described and structured as a values-based engagement and learning network.43 Moreover, being a personal initiative of the Secretary-General, initially established without General Assembly approval, it could not have been a UN regulatory instrument even if Annan had been so inclined.44 Instead, the Compact was designed as a norms-based learning forum and engagement mechanism, which we saw as a necessary complement to other approaches, including business initiatives and lawmaking. As a guide to responsible business conduct the Compact promoted ten principles inspired by UN declarations in the areas of human rights, labor and the environment, with anti-corruption added once that UN convention was in place.45 The ten principles were intended to provide a public focal point to help inform proliferating private corporate codes. To indicate seriousness, participation in the Compact required a letter from a company’s CEO, which typically requires board approval, or from the head of other participating institutions including NGOs and workers’ organizations. As a modest accountability measure, the Compact subsequently adopted the requirement that participants submit annual progress reports, which were made public. There is no capacity to review these substantively, but companies failing to submit two years running are “delisted.”46 In terms of its method of inducing long-term change in corporate conduct, the Compact reflects a broadly “social constructivist” approach.47 In social science terms, this means taking seriously an independent role of ideational factors, human agency, and institutional learning— in addition to appreciating such standard factors as power and interests. For example, social constructivism explores how norms may lead actors to redefine their interests or the social purposes for which they deploy their power, and how innovative ideas and leadership may help overcome institutional impediments to progressive change. The Compact’s agenda has been to consolidate and disseminate the meta-norm of responsible business conduct, as well as to expand and help inform the community of practice in this domain. Its modalities include conducting learning forums and identifying best practices; generating public/private partnerships around the UN “people and planet” agenda; serving as an incubator for innovative initiatives across different business sectors that are then spun off,

For a literature review see Andreas Rasche, ‘“A Necessary Supplement”: What the United Nations Global Compact Is and Is Not’ [2009] Business & Society 511; Andreas Rasche and Dirk Ulrich Gilbert, ‘Institutionalizing Global Governance: The Role of the United Nations Global Compact’ [2012] Business Ethics 100. 43 See, for example, John Gerard Ruggie, ‘global_governance.net: The Global Compact as Learning Network’ [2001] Global Governance 371; Ruggie, ‘The Theory and Practice of Learning Networks: Corporate Social Responsibility and the Global Compact’ [2002] Journal of Corporate Citizenship 27. 44 Indeed, Annan’s authority to launch the initiative was challenged by some governments. In due course, the General Assembly recognized first the Global Compact Office, and eventually the Compact itself. 45 The principles draw on the Universal Declaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the UN Convention Against Corruption. 46 Some 4,000 firms have been delisted over time, disproportionately small and medium sized enterprises (Interview with COMPACT official). 47 See, for example, John Gerard Ruggie, ‘What Makes the World Hang Together? Neo-Utilitarianism and the Social Constructivist Challenge’ [1998] International Organization 855; Michael Barnett, ‘Social Constructivism’ in John Baylis and Steve Smith (eds), The Globalization of World Politics (3rd edn, OUP 2005). 42

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The social construction of the UN Guiding Principles on Business and Human Rights  73 such as the Principles for Responsible Investment with 2,800 signatory institutions from more than 135 countries, representing $80 trillion under management; and establishing national networks, including in emerging market countries such as Brazil, China, and India, as well as in developing countries. As early as 2005, the Compact convened a CSR summit in China, then the largest such event in that country, which included representatives from business, government, major international NGOs including Amnesty and Transparency International, and international labor federations.48 The Compact Network in China includes many of the best-known Chinese firms, such as PetroChina, China Mobile, Baidu, Lenovo, China Minmetals, Sinopec, and the China Development Bank, which is a major source of funding for overseas investments by Chinese companies.49 Could the Global Compact have done better at what it was intended to do? Undoubtedly it could have. Nevertheless, today it is the world’s largest corporate responsibility initiative (it now prefers the term “sustainability”), with more than 12,000 institutional participants— including companies, civil society and workers’ organizations, investor groups, business schools, national networks, and even cities—from 170 countries.50 The fact that it has more participants from emerging market countries than from North America suggests that it has made inroads where they were most needed. Finally, a survey of corporate participants conducted by a Norwegian consultancy on the eve of the Compact’s 15th anniversary found that 60 percent reported being “motivated to advance broader UN goals and issues (e.g., poverty, health, education)”; two-thirds reported that the Compact is “driving our implementation of sustainability policies and practices”; and nearly 50 percent said it is “shaping our company’s vision.” Law and learning are complementary. Where law exists, learning is necessary to understand it and act accordingly. Where law does not exist, is weak, or is not enforced, learning is necessary to attenuate the adverse effects and help inform its possible future formation.

IV

POLYCENTRIC GOVERNANCE

Having declined to approve the Norms, in 2005 the Commission on Human Rights established a mandate for a “special procedure,” meaning an independent expert, and asked the UN Secretary-General to select the mandate holder. That is how I came to be the Special Representative of the Secretary-General for Business and Human Rights.51 The initial mandate was modest: to identify and clarify standards and best practices in the area of business and human rights, for both states and business enterprises; to clarify such concepts as “corporate complicity” in human rights abuses committed by a related party, as well as “corporate sphere of influence”; and to develop materials for human rights impact assessments. Due to controversies surrounding the issue, the initial mandate was only for two years, not the normal three;

See http://​www​.csrwire​.com/​press​_releases/​21599​-United​-Nations​-Global​-Compact​-to​-Convene​ -i​-Global​-Compact​-Summit​-China​-i​-in​-Shanghai​-30​-November​-1​-December​-2005​- accessed 31 March 2020. 49 See https://​www​.unglobalcompact​.org/​engage​-locally/​asia/​china accessed 8 June 2017. 50 The figures reported in this paragraph are taken from DNV-GL Group, Impact. Transforming Business, Changing the World: The United Nations Global Compact (DNV-GL Group 2015). 51 UN Commission on Human Rights, Resolution 2005/69 (20 April 2005). 48

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74  Research handbook on human rights and business it was later extended to a full term, and then for a second full term, the limit. No Guiding Principles were called for or even anticipated at the outset. I was merely required to deliver reports annually to the Commission and then the Human Rights Council that replaced it in 2006, as well as to the UN General Assembly. While I certainly drew lessons from the Compact experience, this mandate was different. To begin with, it was a mandate from an intergovernmental body, not a personal initiative of a Secretary-General. Moreover, it involved an in-depth examination of business and human rights. As such, it included the role of states and the question of remedy, neither of which the Compact addressed. I recapitulate briefly the core concepts that informed the development of the Guiding Principles. A

Multiperspectival Framing

Social scientists who study the role of ideational factors, including norms, in promoting policy change have long understood the importance of framing. Successful framing often results from simplicity and hard-to-argue-with principles. For example, in the Access to Essential Medicines campaign concerning the price of HIV/AIDS treatment drugs in developing countries, “patients before patents” and “patents kill” were highly successful tag lines because they evoked deep underlying moral norms.52 But that campaign, coordinated by Médecins Sans Frontiѐres, was aimed at one party: the pharmaceutical industry. And it had one overarching aim: to drive down the price of drugs. My mandate was multidimensional, thus requiring multiperspectival framing. The Guiding Principles rest on the empirical observation that corporate conduct at the global level is shaped by three distinct governance systems. The first is the traditional system of public law and governance, domestic and international. Important as this is, by itself it has been unable to do all the heavy lifting on many global policy challenges, from poverty eradication to combating climate change. The second is a system of civil governance involving stakeholders concerned about adverse effects of business conduct and employing various social compliance mechanisms, such as advocacy campaigns, lawsuits, and other forms of pressure, but also partnering with companies to induce positive change. The third is corporate governance, which internalizes elements of the other two (unevenly, to be sure) and shapes enterprise-wide strategy and policies, including risk management. The challenge was to try and formulate a normative platform on which the three governance systems could become better aligned in relation to business and human rights, compensate for their respective shortcomings, and begin to play mutually reinforcing roles out of which significant cumulative change can evolve over time. To foster that alignment, the Guiding Principles draw on the different discourses and rationales that reflect the different social roles each governance system plays in regulating corporate conduct. Thus, for states the emphasis is on the legal obligations they have under the international human rights regime to protect against human rights abuses by third parties within their jurisdiction, including business, as well as policy rationales that are consistent with, and supportive of, meeting those obligations—such as when they do business with business. For businesses, beyond compliance with legal obligations, the Guiding Principles focus on the 52 Susan K Sell and Aseem Prakash, ‘Using Ideas Strategically: The Contest between Business and NGO Networks in Intellectual Property Rights’ [2004] International Studies Quarterly 143.

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The social construction of the UN Guiding Principles on Business and Human Rights  75 need to manage the risk of involvement in human rights abuses, which requires that companies employ due diligence to avoid infringing on the rights of others and address harm where it does occur. For adversely affected individuals and communities, the Guiding Principles stipulate ways for their further empowerment through meaningful dialogue and engagement throughout the due diligence cycle as well as means to realize their rights to remedy, both judicial and non-judicial. These perspectives are combined within the “Protect, Respect and Remedy” framing, and spelled out in the Guiding Principles. For traditional human rights scholars perhaps the most controversial aspect of the Guiding Principles has been the foundation of the second pillar—the corporate responsibility to respect human rights. I turn to it next. B

Social Norms

Advocacy oriented international human rights lawyers and others informed by them tend to differentiate between two types of norms: moral and legal. From moral norms many then try to derive and drive lex feranda: law as it should be. Social scientists and sociologically-minded legal scholars also place great weight on the role of social norms. Of course, there are dynamic relationships among the three. To take one simple linear example, campaigns against smoking in restaurants were initially justified on the essentially moral grounds that others have a right not to be subjected to the health risks of secondary smoke inhalation. This soon turned into an accepted social norm, enforced by pressure from other patrons as well as many restaurants themselves, before becoming a legal norm in many countries. The Guiding Principles reaffirm that business enterprises must comply with all applicable legal requirements. Over and above legal compliance, they also stipulate that enterprises have the responsibility to respect human rights, irrespective of states’ willingness or ability to enforce the law. Where does this responsibility to respect human rights come from? In the Guiding Principles it is anchored in a transnational social norm. But how does that work at the global level, where social norms vary across different countries and cultures?53 Social norms are shared expectations of how particular actors are to conduct themselves in given circumstances.54 They hold within specific spheres of social interaction. The corporate responsibility to respect human rights enjoys widespread recognition as a social norm in what I have elsewhere termed “the global public domain”—which functions much like a domestic civic or public sphere.55 To illustrate this concept, when Oxfam America funds community activists in Cajamarca, Peru, who organize protests against the local operations of an American mining company, and when it also brings community leaders to the company’s annual shareholder meetings or to a UN business and human rights forum in Geneva to make their case to the assembled audience, and to the world beyond through the press and social For the purposes of the Guiding Principles, there was no need to engage the question of deeper moral bases of human rights. 54 K-D Opp, ‘Norms’ in Neil J Smelser and Paul B Baltes (eds), International Encyclopedia of the Social and Behavioral Sciences (Elsevier 2001) Vol 10, drawing on the classic work of George C Homans, Social Behavior: Its Elementary Forms (Harcourt, Brace & World 1974); also see Martha Finnemore and Kathryn Sikkink, ‘International Norm Dynamics and Political Change’ [1998] International Organization 887. 55 John Gerard Ruggie, ‘Reconstituting the Global Public Domain: Issues, Actors and Practices’ [2004] European Journal of International Relations 499. 53

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76  Research handbook on human rights and business media, those actions unfold in transnational space, not simply in separate locales. Similarly, when Zambian or Andean communities lodge complaints against Chinese companies based on social norms that the communities had previously established with Western companies in the same or nearby locales, and the Chinese managers request guidance from Beijing, and Beijing’s guidance in turn draws on the Global Compact, the Guiding Principles, or the OECD Guidelines for Multinational Enterprises, those acts unfold in transnational space. Similar examples can be drawn from virtually any sector of transnational business activity. The totality of such transnational spaces constitutes the global public domain. The global public domain has become an increasingly densely interconnected arena of discourse, contestation, and action involving both private and public actors, focused around the creation or defense of social norms and policy preferences regarding global public goods. In human rights discourse, respecting rights means to not infringe on the rights of others. We know that the corporate responsibility to respect human rights is a transnational social norm because the relevant actors acknowledge it as such, including governments, civil society, and businesses themselves in their corporate responsibility commitments. This does not imply that a transnational social norm is necessarily more (or less) effective than, or unrelated to, moral and legal norms; it is simply different in how it functions socially. Enterprises of course are free to undertake additional commitments, and governments to encourage or require them to do so. But respect is the baseline expectation. Including the category of social norm with moral and legal norms enables the Guiding Principles to take the important additional step of not only specifying that business enterprises should respect human rights, but also providing them with a workable approach to how. The logic is straightforward: in order for an enterprise to demonstrate to itself, let alone to anyone else, that it respects human rights it must have systems in place whereby it can know and show that it does. Accordingly, beyond having a policy commitment, the Guiding Principles outline a four-step human rights due diligence process: assessing actual and potential human rights impacts, integrating and acting on the findings, tracking responses, and communicating how impacts are addressed. Moreover, where enterprises have caused or contributed to adverse impacts, they should provide for or cooperate in their remediation; where they have neither caused nor contributed to harm but are directly linked to it through a business relationship they should exercise leverage to prevent or mitigate the harm, and where harm has already occurred to use leverage in incentivizing those partners who have caused/contributed to it.56 As for which human rights the corporate responsibility to respect encompasses, the answer the Guiding Principles provide is all internationally recognized rights that an enterprise impacts. The long-standing doctrinal debate about whether business enterprises can be duty bearers under international human rights law is avoided because the Guiding Principles state that businesses should look to current internationally recognized human rights for an authoritative enumeration, not of human rights laws that might apply to them, but of human rights they should respect. That formulation also made it possible for countries that have not ratified key international human rights conventions, including China and the United States, to endorse the Guiding Principles, which reference such conventions, and to recognize the Guiding Principles in their own national policies and guidance to companies.57 See Guiding Principles 16 through 20. This was made abundantly clear during the consultation/negotiation process, and not only for these two countries. 56 57

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The social construction of the UN Guiding Principles on Business and Human Rights  77 Finally, the way enterprises know which rights they might adversely impact is through effective human rights due diligence. Wherever possible, this should include engagement with potentially affected stakeholders or their representatives. Social norms do not inevitably lead to changes in lex lata: law as it is. But where new hard law is not immediately in the offing, creating, consolidating, disseminating, and embedding social norms is an indispensable tool for inducing changes in conduct. Besides, in Amartya Sen’s felicitous words, viewing human rights solely as “parents” or “progeny” of law would “unduly constrict”—Sen even uses the term incarcerate—the social logics and processes other than law that drive enduring public recognition of human rights.58 Human rights are better seen more broadly: as mediators of social relations, especially relations that involve significant power asymmetries, in which hard law is but one part of a larger ecosystem of instruments.59 C

Reflexive Dynamics

The Guiding Principles are a text, to be sure. But as César Rodríguez-Garavito affirms, they should be evaluated not only as a static text “but also in their dynamic dimension (such as their capacity to push the development of new norms and practices that go beyond the initial content).”60 Indeed, my hope was that they would trigger an iterative process of interaction among the three global governance systems, producing cumulative change over time. No top-down command-and-control regulation could possibly create such a process at the international level, even if one were to exist. But neither would entirely unrelated actions by the three governance systems. A different path needed to be identified. Elements of so-called reflexive regulation and reflexive law were suggestive. Gunther Teubner, a leading German legal scholar and sociologist, introduced the concept of reflexive law in a seminal paper published in 1983.61 Teubner argued that the idea that major social and environmental problems in modern society could be “steered” from one central site had become anachronistic, given society’s complexity and the pace of change. But giving free rein to self-regulation would continue to generate mounting social and environmental externalities. Thus Teubner proposed a more procedurally-oriented approach that avoids the regulate/deregulate, mandatory/voluntary, and hard/soft law dichotomies. His is not so much a middle ground as it is different in concept and practice: “The role of reflexive law is to … create the structural premises for decentralized integration of society by supporting integrative mechanisms within autonomous social subsystems.”62 Put in more simple terms, reflexive law prescribes a framework of institutionalized procedures and organizational norms. Within that framework, it seeks to have the entities that are targeted for regulation to acquire the capacity needed to more effectively address their social and environmental externalities. And the framework itself is subject to adjustment based on experiential feedback. From this line of

Amartya Sen, ‘Elements of a Theory of Human Rights’ [2004] Philosophy and Public Affairs 319. Friedrich Kratochwil, The Status of Law in World Society: Meditations on the Role and Rule of Law (CUP 2014); also Christian Reus-Smit, ‘Human Rights in a Global Ecumene’ [2011] International Affairs 1205. 60 Rodríguez-Garavito (n 8) 11. 61 Gűnther Teubner, ‘Substantive and Reflexive Elements in Modern Law’ [1983] Law & Society Review 239. 62 ibid 255. 58 59

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78  Research handbook on human rights and business thinking emerged the idea of “regulating self-regulation,” which has had particular uptake in US national environmental law and policy, among other areas.63 Of course, at the national level, a central authority can step in more readily to make adjustments or create new mechanisms. That is far more difficult at the international level, which lacks a central authority.64 Nevertheless, the underlying ideas were useful in thinking about building iterative interactions among the three pillars into the Guiding Principles. Consider these examples. With regard to companies, the prescribed risk management includes assessing risk to people, not simply to the company; human rights due diligence should be ongoing and requires meaningful consultation with potentially affected groups and other relevant stakeholders, such as civil society and workers’ organizations; and operational-level grievance mechanisms must be based on engagement and dialogue with the people they are intended to serve, as well as being rights-compatible. As for states, their core legal obligations include protecting human rights from abuse by business within their jurisdiction. Under the Guiding Principles, where states provide financial and other support to business enterprises, they should require the enterprises to conduct human rights due diligence if the nature of the business or operating context poses significant human rights risks. They should promote respect for human rights by enterprises with which they conduct commercial transactions. States should also ensure that they retain adequate domestic policy space to meet their human rights obligations when pursuing other policy objectives, for example, in the areas of trade and foreign investment agreements. Through the Guiding Principles, rights holders who are harmed by business activities, and those who represent or speak for them, gain a new authoritative advocacy tool and basis for participation that can be invoked in relation to business enterprises and states. In short, the three pillars of the Protect, Respect and Remedy framework are interrelated. They reflect three critical functions that need to be performed better, and they seek to engage the three global governance systems—public, civil, and corporate—individually and interactively to advance those aims. Within this framework, further international legalization has a role to play through carefully crafted precision tools intended to reinforce this dynamic, not by means of some single overarching treaty that tries to encompass the entirety of the complex, diverse and contested issues that make up business and human rights as a subject of concern and action.65 D

Process Legitimacy

Karin Buhmann attributes at least part of the Guiding Principles’ success to what she calls the “process legitimacy” whereby they were developed.66 The subject of legitimacy features centrally in any international process, particularly one conducted by a single independent expert. 63 Eric W Orts, ‘A Reflexive Model of Environmental Regulation’ [1995] Business Ethics Quarterly 779. 64 William E Scherman, ‘Reflexive Law and the Challenges of Globalization’ [2001] Journal of Political Philosophy 81. 65 John Gerard Ruggie, ‘Business and Human Rights: The Evolving International Agenda’ [2007] American Journal of International Law 819. 66 Karin Buhmann, ‘The Development of the “UN Framework”: A Pragmatic Process towards a Pragmatic Output’ in Mares (n 8); Buhmann, ‘Business and Human Rights: Analysing Discursive Articulation of Stakeholder Interests to Explain the Consensus-based Construction of the “Protect, Respect, Remedy” UN Framework’ [2012] International Law Research 88.

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The social construction of the UN Guiding Principles on Business and Human Rights  79 Nevertheless, Pauwelyn, Wessel, and Wouters suggest that what they call “thick stakeholder consensus” behind an informal governance arrangement can be normatively superior to the “thin state consent” on which many treaties rely. “The actors involved are more diverse and expert. The output … is elaborated more carefully and coherently, supported by a broader consensus, both ex ante, when the norm is developed, and ex post, when the norm is accepted because it works.”67 Process legitimacy is critical to “thick stakeholder consensus.” In developing and gaining HRC endorsement for the Guiding Principles I sought to achieve process legitimacy largely through four means, described in detail elsewhere.68 The first was to establish a common factual baseline in the attempt to move beyond the anecdotal evidence that had dominated previous debates on all sides. This involved mapping patterns of corporate-related human rights abuse; identifying prevailing standards and best practices; analyzing the cost to business of failing to respect human rights; examining how corporate and securities law may aid or constrain responsible business practices; documenting the effects of international investment agreements on the state duty to protect; surveying human rights treaty bodies’ commentaries on relevant subjects; and exploring the permissible grounds for extraterritorial jurisdiction across a number of different regulatory domains. The second was convening nearly 50 international consultations on all continents, most being multistakeholder in makeup. These examined the human rights situations in different industries and operating environments, for different groups of people, and explored the viability of various ways of responding to ongoing human rights challenges. Third, I made site visits to the operations of companies in different sectors and countries, ranging from agriculture to manufacturing and mining. Where possible I combined site visits with discussions with local community leaders or workers’ representatives, arranged through NGOs or international labor federations. Lastly, my team conducted pilot projects in several sectors and countries to inform the Guiding Principles’ provisions for human rights due diligence and grievance mechanisms. Throughout, I regularly briefed governments in Geneva, New York, and national capitals. A draft text of the Guiding Principles was posted online, eliciting comments from individuals and institutions in 120 countries. By the time the Guiding Principles were considered by the HRC they enjoyed strong support from governments and business, as well as general but not enthusiastic support from the major human rights organizations, which would have wished for a legally binding outcome. Council approval came in two stages. It first “welcomed” the “Protect, Respect and Remedy” framework in 2008, and then asked me to serve another term in order to “operationalize” it. The Guiding Principles, which the Council endorsed in 2011, are that operationalization.

Pauwelyn et al (n 21) 749. Ruggie (n 31) chapter 4. Financial support for the mandate was provided by voluntary contributions from governments. I also benefited from pro bono assistance provided by academics, NGOs and law firms. Research results and summaries of consultations and pilot projects remain posted on the Business and Human Rights Centre website: https://​business​-humanrights​.org/​en/​un​-secretary​-generals​ -special​-representative​-on​-business​-human​-rights 67 68

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V

DISTRIBUTED NETWORKS

Work on the implementation of the Guiding Principles began even before they were formally endorsed. If governments believe that a follow up to a mandate is warranted, the typical UN procedure is to create a new one. Thus, the HRC established an expert Working Group with one member from each of the five recognized regions, tasked with disseminating the Guiding Principles and promoting their implementation.69 I welcomed this development while also realizing that much more work would be required beyond UN precincts. Borrowing a term from computer science, I focused on identifying a handful of actors involved in some central aspect of business and human rights who might play a role in a larger and more diverse distributed network. Some of these actors adopted core elements of the Guiding Principles outright; others did so in part; still others took the Guiding Principles into entirely new domains. A few examples follow. The OECD Guidelines for Multinational Enterprises (OECD Guidelines) date back to 1976. They have been revised over time, but continued to lack a human rights chapter. A draft text of the Guiding Principles was ready when the OECD began the Guidelines’ latest revision early in 2011. All parties agreed that the two initiatives should be closely aligned so as not to issue competing or even incompatible guidance to business. As a result, the new human rights chapter of the OECD Guidelines is taken virtually verbatim from Pillar II of the Guiding Principles (the corporate responsibility to respect human rights).70 The OECD Guidelines matter not least because they provide the only international complaints mechanisms under which anyone can bring a “specific instance” of harm committed by a multinational to a designated office in a country adhering to them, where the harmful conduct occurred in that country or the multinational is based in such a country. The designated national office attempts to mediate the dispute and issues a final statement on whether and how it was resolved. Human rights cases spiked after 2011.71 ISO26000, a guidance document on social responsibility developed by the International Organization for Standardization, was running in parallel with the UNGP mandate; here too we sought to ensure that the human rights provisions were closely aligned.72 ISO matters to this issue because its other standards and guidance,

UN Human Rights Council Resolution A/HRC/RES/17/4 (6 July 2011). Manfred Schekulin, ‘Shaping Global Business Conduct: The 2011 Update of the OECD Guidelines on Multinational Corporations’ Columbia FDI Perspectives # 47 (26 September 2011). Schekulin chaired the OECD’s Intergovernmental Investment Committee. 71 John Gerard Ruggie and Tamaryn Nelson, ‘Human Rights and the OECD Guidelines for Multinational Corporations: Normative Innovations and Implementation Challenges’ [2015] Brown Journal of World Affairs 99. 72 For discussion of the impact of the mandate on ISO26000 from an NGO perspective, see Sandra Atler, The Impact of the United Nations Secretary-General’s Special Representative & the UN Framework on the Development of the Human Rights Components of ISO 26000 (2011), Harvard Kennedy School, Corporate Responsibility Initiative Working Paper No. 64, https://​www​.hks​.harvard​ .edu/​centers/​mrcbg/​programs/​cri/​research/​papers, accessed 14 June 2017; and from a business perspective, Alan Fine, ‘Impact of the work of the UNSG’s Special Representative on business and human rights on deliberations in the Industry Stakeholder Group in ISO’s Working Group on Social Responsibility’ (2011), https://​business​-humanrights​.org/​en/​article​-provides​-ngo​-perspective​-on​-how​-the​-work​-of​-un​ -sp​ecial​-representative​-ruggie​-impacted​-the​-iso​-26000​-guidance​-standard​-on​-social​-responsibility​ #c58836, accessed 14 June 2017. 69 70

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The social construction of the UN Guiding Principles on Business and Human Rights  81 for instance in quality management and environmental management, tend to have significant business uptake, including in Asia. The International Finance Corporation (IFC), the private sector arm of the World Bank, has performance standards built into its lending and investment policies. Through close collaboration, the IFC incorporated such key elements of the Guiding Principles as the requirement for clients to respect human rights, and the need in certain high risk circumstances to add human rights due diligence. The IFC matters because it affects clients’ access to its capital, and because its criteria are tracked by private sector banks that account for three-quarters of all project lending in the world.73 The European Union not only endorsed the Guiding Principles; the Commission changed its own official definition of CSR in response to the Guiding Principles and requested that all member states develop National Action Plans for their implementation.74 (The UN Working Group subsequently recommended to all UN member states that they produce National Action Plans.) The EU went on to adopt mandatory non-financial reporting requirements of EU-based firms above a certain size, the provisions of which the Guiding Principles helped inform.75 Moreover, the Guiding Principles’ due diligence provisions found their way into both US and EU law concerning conflict minerals, US regulations on investment by American firms in Myanmar, the UK’s Modern Slavery Act, and a new French law that imposes a human rights due diligence-like requirement on companies, enforceable by tort liability where injuries result from the failure to have an effective plan. Leading companies have been a major source of direct uptake. Indeed, several had written to the Human Rights Council recommending that it endorse the Guiding Principles, recognizing that a common foundation was desirable and being comfortable with the Guiding Principles on which they, like other stakeholders, had been consulted. Some companies have since issued stand-alone human rights reports using the Guiding Principles Reporting Framework developed by Mazars, the international audit, accounting and consulting firm, together with Shift, a non-profit established by members of my former UN team in 2011, which I chair.76 Shift and others have found that while company uptake of the Guiding Principles is becoming more widespread, it remains partial and is not yet deep enough.77 However, uptake is not limited to Western firms or governments. A dozen developing countries already have issued or are in the process of developing National Action Plans.78 And regulatory authorities in China are 73 See http://​www​.ifc​.org/​wps/​wcm/​connect/​6b49908049​8009a2a78cf7336b93d75f/​Phase3​_QCR​ -HumanRights​.pdf​?MOD​=​AJPERES, and http://​www​.equator​-principles​.com/​ accessed 8 June 2017. 74 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions (2011), A Renewed EU Strategy 2011–14 for Corporate Social Responsibility http://​eur​-lex​.europa​.eu/​legal​-content/​EN/​TXT/​?uri​=​celex​ %3A52011DC0681 accessed 8 June 2017. 75 Richard Howitt, ‘The EU Law on Non-financial Reporting—How We Got There’, The Guardian (16 April 2014) accessed 8 June 2017. 76 Shift, ‘UN Guiding Principles Reporting Framework’ (2015) accessed 8 June 2017. 77 Shift, ‘Human Rights Reporting: Are Companies Telling Investors What They Need To Know? (2017) accessed 8 June 2017. 78 Business & Human Rights Resource Centre, Government Action Platform accessed 8 June 2017.

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82  Research handbook on human rights and business drawing on international standards like the Guiding Principles and OECD Guidelines to advise their own companies on appropriate human rights practices in overseas operations—including the recommendation that Chinese mining companies should “observe the UN Guiding Principles on Business and Human Rights during the entire life-cycle of the mining project.”79 It took time for some of the major human rights organizations to realize the full potential of the Guiding Principles as an advocacy tool. But workers’ organizations were supportive from the start, recognizing the limits of relying only on a long history of legal conventions through the International Labor Organization.80 Corporate lawyers provided pro bono assistance to the mandate, and in turn positioned themselves to advise potential clients on human rights risk management. An additional bonus of their involvement was that law societies in several countries became interested. The American Bar Association was an early endorser of the Guiding Principles. The International Bar Association went so far as to issue official guidance on what the Guiding Principles mean for bar associations as well as for law firms, as businesses in their own right and in their role as wise counsel to clients.81 Possibly the most unusual development for a UN-based initiative has been endorsement of the Guiding Principles by FIFA, the governing body of international football, and its knock-on effects. FIFA’s reach into countries and people’s lives is impressive. FIFA has 211 national member associations clustered into six regional confederations. According to its former president, there are 300 million active participants in football, and 1.6 billion people around the world are involved directly or indirectly in the game.82 After awarding successive World Cups to Russia and Qatar, FIFA was under escalating pressure in 2014 on matters not only of corruption but also of human rights. Problems in Russia included its anti-LGBTQ law, the manner of land acquisition by the authorities for tournament purposes, and alleged violations of labor standards in the construction of facilities. In Qatar the core issue has been massive violations of migrant workers’ rights, who essentially become bonded labor, exploited by recruitment firms and contractors (and even more so by subcontractors) building stadiums and other infrastructure. Mary Robinson, former President of Ireland and former UN High Commissioner for Human Rights, and I sent a letter to FIFA’s president on behalf of the Institute for Human Rights and

79 China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters, ‘Guidelines for Social Responsibility in Outbound Mining Investments’ (2014) 34 80 International Trade Union Confederation, ‘A Briefing Note for Trade Unionists—The United Nations “Protect, Respect and Remedy” Framework and Guiding Principles on Business and Human Rights’ (2011)

81 IBA, ‘Practical Guide on Business and Human Rights for Business Lawyers’ (2016) accessed 8 June 2017. 82 Extraordinary FIFA Executive Committee Meeting—Press Conference (20 July 2015), video accessed 24 May 2017.

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The social construction of the UN Guiding Principles on Business and Human Rights  83 Business, with which we were both associated.83 We referenced these issues and urged that FIFA address them by aligning its policies and practices with the Guiding Principles. FIFA subsequently asked me to produce a report identifying its major human rights challenges and make recommendations. I agreed on the condition that I would have full control over the report’s content and that it would be published by Harvard University.84 My effort was welcomed by FIFA sponsors, leading NGOs, and workers’ organizations, including the players’ union. In response to the report, to date, FIFA has added a statutory provision committing to respect all internationally recognized human rights. It has adopted a human rights policy and established a Human Rights Advisory Board that includes sponsors and representatives from NGOs, labor, and the Office of the UN High Commissioner for Human Rights. Perhaps most important for the people in host countries, FIFA is including human rights criteria in bidding requirements for future World Cups—the most popular tournament of the world’s most popular sport.85 In 2017, triggered by FIFA’s move, the Union of European Football Associations, one of FIFA’s regional confederations, adopted human rights criteria for its Euro 2024 tournament, for which Germany and Turkey are competing as host nations. The new bidding requirements state that successful bidders are expected to adhere to the Guiding Principles, including “proactively assessing human rights risks,” “culturally embedding human rights,” and “implementing means of reporting and accountability” by engaging with relevant stakeholders.86 The International Olympic Committee is moving along a similar path but at a far more tentative pace. Finally, in July 2017 the World Players Association (WPA) announced a World Player Rights Policy “built around sport’s implementation of the United Nations Guiding Principles on Business and Human Rights.”87 The WPA is the global association of players’ unions, bringing together more than 85,000 professional players through more than 100 players’ associations in some 60 countries, including the sports of football (soccer), American football, rugby, basketball, hockey, and cricket. The announcement marks the beginning of a campaign to have all sports organizations adopt policies and practices to respect the human rights of players in line with the Guiding Principles. Finally, the International Olympic Committee is slowly following suit by establishing an independent Human Rights Advisory Board of its own, chaired by Zeid Ra’ad Al Hussein, who recently stepped down as UN High Commissioner for Human Rights. Unlike distributed networks in computer systems, the various entities in these social networks remain independent of one another and have their own missions and priorities, so it is rare that they enact the identical norm or standard. But “orchestration problems,” as Abbott

Available at accessed 8 June 2017. 84 John Gerard Ruggie, ‘For the Game, For the World’ (FIFA and Human Rights, Corporate Responsibility Initiative, Harvard Kennedy School of Government 2016) Research Report 68 accessed 8 June 2017. 85 FIFA, ‘FIFA’s Human Rights Policy’ (2017) accessed 8 June 2017. 86 UEFA, ‘Germany and Turkey Receive Bid Requirements for Hosting UEFA EURO 2024 (2017)’ accessed 8 June 2017. 87 See accessed 13 July 2017. 83

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84  Research handbook on human rights and business and Snidal describe them, are endemic at the international level.88 In the case of the Guiding Principles, both the Working Group and OHCHR can and do serve a limited interpretive function. There is also some evidence of consistent interpretive “crowd sourcing.” For example, a white paper issued by a group of major corporate and investment banks in January 2017 generated considerable push-back against its premise, which claimed that under the Guiding Principles such banks have very tenuous responsibility for what their clients do with loans or advice the banks provide to them.89 In sum, for the Guiding Principles the distributed network approach has turned out to be superior to relying on UN processes and happenstance uptake by other relevant parties alone. Although much of the world has yet to hear about the Guiding Principles, they have spread faster and more widely than would otherwise be the case. The participation of distributed networks has triggered what Finnemore and Sikkink call “norm cascading,”90 well beyond the Guiding Principles’ institutional sphere of origin, into the realm of other international standardsetting bodies, national governments, businesses, civil society organizations, law societies, and the world of popular sports.

VI CONCLUSION It is widely understood that the balance of power among states is shifting. But so too is the organizational ecology of global governance—the way in which global rulemaking is structured.91 The two are related, but only in part. As noted earlier, power shifts make it more difficult to reach strong agreements in large consensus-based forums because the number and diversity of interests has increased significantly. At the same time, informal mechanisms are flourishing, be they private, public, or a combination of the two. Factors in addition to power balances play a role in producing this pattern. Among them are the proliferation of so-called wicked problems and scale mismatches; the creation at the international level of limited membership club-like arrangements among domestic regulatory agencies and professional bodies as a byproduct of globalization; greater ease in establishing informal mechanisms as well as flexibility in changing them; and lower costs of entry as well as exit. The Guiding Principles straddled these two worlds: a formal mandate established by an intergovernmental body; an informal and polycentric process of development; a formal Kenneth W Abbott and Duncan Snidal, ‘Strengthening International Regulation through Transnational New Governance: Overcoming the Orchestration Deficit (rev. ed, 2009) accessed 8 June 2017. 89 Among others, see Statement by UN Working Group on the issue of human rights and transnational corporations and other business enterprises (2017); statement by Bank Track, Greenpeace, Oxfam & 35 others (2017) ‘Significant Concerns Regarding Thun Group Discussion Paper’; and John Gerard Ruggie, ‘Comments on Thun Group of Banks Discussion Paper on the Implications of UN Guiding Principles 13 & 17 in a Corporate and Investment Banking Context; all available at accessed 8 June 2017. The banks issuing the discussion paper include Barclays, BBVA, BNP Paribas, Credit Suisse AG, Deutsche Bank, ING, JP Morgan, RBS, Standard Chartered, UBS Group AG and UniCredit. 90 Finnemore and Kathryn Sikkink (n 54). 91 Kenneth W Abbott et al, ‘Organizational Ecology and Institutional Change in Global Governance’ [2016] International Organization 247. 88

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The social construction of the UN Guiding Principles on Business and Human Rights  85 endorsement; and an ongoing combination of formal and informal implementation. It may not be possible to replicate this process in any other complex and contested global regulatory domains. But the underlying dynamics need to be better understood because they are not unique to business and human rights. A prime example is climate change. At the intergovernmental level, the 1997 Kyoto Protocol, a global binding instrument that included strict emission targets and timetables, is widely described by scholars as a failure of climate governance.92 Building on a phrase used by Olmstead and Stavins, it was too little, too fast, too binding, and too asymmetrical in its obligations between past and emerging emitters. In contrast, the 2015 Paris Agreement has been hailed as a success that draws on lessons of the past and a deeper understanding of climate governance challenges.93 And yet the Paris Agreement rests on national pledges, which are not binding, coupled with a periodic review process, which relies on national self-reporting. Moreover, it is generally accepted that the Agreement by itself will not meet the aspirational target of limiting global temperature rise to 2˚ Celsius, let alone 1.5. Thus, while the following questions may be moot for climate change they may be relevant for other global policy domains: what if governments in 1997 had moved from the 1992 Framework Convention on Climate Change, not to Kyoto, but to a Paris-like pledge-and-review arrangement? Where would we be today? Could it have avoided the extreme polarization of climate change politics in the United States? Would it have engaged emerging and future emitters earlier? Indeed, might we be closer today to what Kyoto hoped to achieve? Why did we get it wrong, and how can that be avoided elsewhere? The idea of human rights is both simple and powerful. The operation and effectiveness of the global human rights regime is neither. The simplicity and power of human rights reside in the idea that every person is endowed with inherent dignity and equal rights. But the fundamental challenge remains, as Kratochwil has put it so well, “how a political project framed by the discourse of rights can be made to ‘stick’ as our interests widen … while familiar communities lose their unquestioned standing and their integrating force.”94 The term political, in this context, does not mean tactical maneuvering or scoring partisan victories. Politics in its deeper sense “lies at the intersection of instrumental and ethical deliberation and action.”95 It is here that ideas and norms have the opportunity to inform and shape social constructs of the common good. There is a long way to go before we can speak of business enterprises being “embedded” in transnational social norms and institutional practices. Bearing witness to human rights abuse and enduring commitments to realizing rights are critical elements toward that end. But so too are evidence-based insights into such matters as how to induce cognitive and normative change, build and expand communities of good practice, and address the com-

92 For example, Robert Falkner et al, ‘International Climate Policy after Copenhagen: Towards a “Building Blocks” Approach’ (2010) Global Policy 252; Sheila M Olmstead and Robert N Stavins, ‘Three Key Elements of a Post-2012 International Climate Change Architecture [2011] Review of Environmental Economics and Policy 1; David G Victor et al, ‘The Climate Threat We Can Beat: What It Is and How to Deal With It’ [2012] Foreign Affairs 122. 93 David G Victor, ‘What the Framework Convention on Climate Change Teaches Us About Cooperation on Climate Change’ [2016] Politics and Governance 133. 94 Kratochwil (n 59) 229. 95 Christian Reus-Smit, ‘The Strange Death of Liberal International Theory’ [2001] European Journal of International Law 573.

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86  Research handbook on human rights and business plexities of institutional design as well as sequencing in policy processes. Both are essential elements in making the business and human rights project stick.

John Gerard Ruggie - 9781786436405

5. Human rights due diligence in theory and practice Mark B. Taylor

1. INTRODUCTION The field of business and human rights has seen important normative developments in recent years. One of the most important developments has been the definition of responsible business conduct in the form of human rights due diligence (HRDD). HRDD was first set out in the United Nations Guiding Principles on Business and Human Rights (UNGPs), unanimously endorsed by Member States at the UN Human Rights Council (HRC) in 2011.1 In the theory elaborated by the UNGPs, responsible businesses are those which act with due diligence to avoid infringing on the rights of others. In practice, the UNGPs set out an operational standard in which responsible business conduct consists of having a policy to respect human rights and implementing it through a due diligence process, including taking action to identify, prevent, avoid, cease or remediate negative impacts on rights arising from company activities. This chapter describes the particular form of HRDD as defined by the UNGPs as a business practice through which a company is able to ‘identify, prevent, mitigate and account for how they address adverse human rights impacts’.2 The chapter locates HRDD in the overall normative framework set out by the UNGPs and explores key concepts central to HRDD, in particular the notions of respect, responsibility, risk and leverage. The chapter also considers due diligence a regulatory technique used in policy and law to encourage business respect for human rights.

2.

THE CORPORATE RESPONSIBILITY TO RESPECT HUMAN RIGHTS

In 2011, the HRC unanimously endorsed the UNGPs. In so doing, Member States provided significant normative authority to the Guiding Principles and the ‘Protect, Respect and Remedy’ Framework elaborated by UN Special Representative of the Secretary General for Business and Human Rights, Professor John Ruggie.3 The three pillars of the Framework ‘Human Rights and Transnational Corporations and Other Business Enterprises,’ A/HRC/ RES/17/4 16 June 2011. 2 UNGP 17 ‘Human Rights Due Diligence’, ‘Guiding Principles on Business and Human Rights, Implementing the United Nations “Protect, Respect and Remedy” Framework, UN Doc HR/PUB/11/04’ (United Nations Office of the High Commissioner for Human Rights, 2011). 3 The UN Human Rights Council first welcomed the Framework in 2008 and renewed Ruggie’s mandate asking that he develop an implementing framework. In 2011, Ruggie proposed the Guiding Principles and, in an unprecedented step, the Guiding Principles were unanimously endorsed by the Human Rights Council in June 2011. 1

88 Mark B. Taylor - 9781786436405

Human rights due diligence in theory and practice  89 had been developed over several years of intensive consultation and evidence gathering about business impacts on human rights and relevant legal norms and regulations, as well as consultations with representatives of business, civil society and governments about business responsibilities for human rights. The first pillar of the UNGPs reaffirmed the overall hierarchy under international human rights law, in which States are the primary duty bearers for human rights. On that foundation, the second pillar of the UNGPs then set about defining the ‘Corporate Responsibility to Respect Human Rights’. The responsibility to respect human rights described in the second pillar of the UNGPs is an independent responsibility of business entities which, while not separate from state regulation, is nonetheless independent of the state duty under international human rights law.4 Although independent and distinct from the first pillar, the corporate responsibility to respect human rights is not isolated from the duty of the state to ensure respect for human rights. States ensure respect for human rights by business through ‘appropriate steps to prevent, investigate, punish and redress such abuse through effective policies, legislation, regulations and adjudication’.5 A company has a responsibility independent of state action but one which is nonetheless performed in the context of the state duty to protect human rights, including the requirements of compliance with national law to which all companies are subject. The second pillar consists of two parts: ‘Foundational Principles’ (principles 11 through 15) and ‘Operational Principles’ (principles 16 through 26). Together, the principles of the second pillar systematically parse the definition of the corporate responsibility to respect human rights: ‘corporate’ is defined to include ‘all enterprises regardless of their size, sector, operational context, ownership and structure’6 and to extend ‘throughout the business enterprise’.7 ‘Respect’ is defined under the first of the Foundational Principles, Guiding Principle 11, as to ‘avoid infringing on the human rights of others and (to) … address adverse human rights impacts with which they are involved’.8 ‘Human rights’ are defined to include ‘internationally recognized human rights’ including ‘at a minimum ... the International Bill of Human Rights and the principles concerning fundamental rights set out in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work’.9 4 Under the second pillar of the UNGPs, the Commentary to UNGP 11 states: ‘The responsibility to respect human rights is a global standard of expected conduct for all business enterprises wherever they operate. It exists independently of States’ abilities and/or willingness to fulfil their own human rights obligations, and does not diminish those obligations. And it exists over and above compliance with national laws and regulations protecting human rights. Addressing adverse human rights impacts requires taking adequate measures for their prevention, mitigation and, where appropriate, remediation.’ See also John Ruggie, Just Business: Multinational Corporations and Human Rights (WW Norton & Company 2013) 90–95. 5 UN Doc HR/PUB/11/04, Guiding Principle 1, 3. 6 Ibid, Guiding Principle 14, 15. 7 Ibid, Guiding Principle 16, 16; see also Guiding Principle 3, 4. 8 Ibid, Guiding Principle 11, 13. The Interpretive Guide to the GPs states: ‘An “adverse human rights impact” occurs when an action removes or reduces the ability of an individual to enjoy his or her human rights.’ ‘The Corporate Responsibility to Respect Human Rights: An Interpretive Guide’ (UN Office of the High Commissioner for Human Rights (OHCHR), 2012) 5. 9 Ibid, Guiding Principle 12, 13–14. The International Bill of Human Rights consists of the Universal Declaration of Human Rights (UDHR), the International Convention on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR). Business enterprises may need to consider additional standards arising from human rights law, such as instruments protecting indigenous rights, persons with disabilities or in situations of conflict.

Mark B. Taylor - 9781786436405

90  Research handbook on human rights and business In other words, the substantive scope of business responsibility – the rights which a business should respect – includes all human rights. International human rights norms, including labour rights, constitute the standard against which business behaviour will be measured with respect to human rights. Adverse impacts on rights involve a negative effect on any of these rights.10 Respecting rights involves not infringing on rights and freedoms and, where infringements have occurred, taking steps to make good such infringements. The broad scope of the UNGPs derives from Ruggie’s reading of the evidence. Based on a study of more than 300 reports of alleged business human rights abuses, Ruggie concluded that ‘there are few if any internationally recognized rights business cannot impact – or be perceived to impact – in some manner’ and that ‘because companies can affect virtually all internationally recognized rights, they should consider the responsibility to respect in relation to all such rights’.11 In his 2008 report, Ruggie wrote: the main focus in the debate has been on identifying a limited set of rights for which they may bear responsibility. For example, the draft norms on the responsibilities of transnational corporations and other business enterprises with regard to human rights generated intense discussions about whether its list of rights was too long or too short, and why some rights were included and others not. At the same time, the norms would have extended to companies essentially the entire range of duties that States have, separated only by the undefined concepts of ‘primary’ versus ‘secondary’ obligations and ‘corporate sphere of influence’. This formula emphasizes precisely the wrong side of the equation: defining a limited list of rights linked to imprecise and expansive responsibilities, rather than defining the specific responsibilities of companies with regard to all rights.12 (emphasis added)

In short, under the UNGPs, business responsibility is defined in terms meant to reflect the full range of potential impacts. The subjective scope of business responsibility extends to all business entities and their activities and relationships. It is the nature of the business activity itself, in its interaction with society, which determines what rights a particular company might infringe upon.

3.

HUMAN RIGHTS DUE DILIGENCE

The UNGPs describe HRDD as the operationalization within a company of a policy of respecting human rights,13 including taking action to ‘cease or prevent’ negative impacts on rights,14

Subsequent instruments have extended the scope of responsible business conduct beyond human rights. For example, the OECD Guidelines (updated to include a more detailed approach to human rights in 2011) defines the relevant standards as human rights, labour rights, the environment, consumer interests, fiscal governance (anticorruption and taxation). 11 ‘Protect, Respect and Remedy: A Framework for Business and Human Rights, Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, John Ruggie A/HRC/8/5’ (Human Rights Council, April 7, 2008) para 52 and para 24 respectively. 12 Ibid para 51. At para 24 he added: ‘In practice some human rights may be at greater risk than others in particular industries or contexts, and therefore will be the focus of heightened attention. However, situations may change, so all human rights should be the subject of periodic review.’ 13 Guiding Principle 15 (a), Guiding Principle 16, 16. 14 Commentary, Guiding Principle 19, 21. 10

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Human rights due diligence in theory and practice  91 and to remediate those impacts that do occur. The UNGPs describe due diligence practice as follows: 17. In order to identify, prevent, mitigate and account for how they address their adverse human rights impacts, business enterprises should carry out human rights due diligence. The process should include assessing actual and potential human rights impacts, integrating and acting upon the findings, and tracking responses as well as communicating how impacts are addressed. Human rights due diligence: (a) Should cover adverse human rights impacts that the business enterprise may cause or contribute to through its own activities, or which may be directly linked to its operations, products or services by its business relationships (b) Will vary in complexity with the size of the business enterprise, the risk of severe human rights impacts, and the nature and context of its operations (c) Should be on-going, recognizing that the human rights risks may change over time as the business enterprise’s operations and operating context evolve.15

HRDD is an ongoing process that takes place before, during and after business projects, transactions, contracts, and any number of business activities. Once a company has committed to respecting human rights, usually through a company policy,16 implementation of that policy commitment involves three broad categories of activity which make up the practice of HRDD: identification of actual or potential adverse impacts;17 actions to cease, prevent, mitigate, or remediate adverse impacts;18 tracking and accounting for actions taken through, for example, reporting or other forms of disclosure.19 As a result, a systemic approach to HRDD could be described as the following: ●● A policy is adopted at the highest level of the organization which includes a commitment to respect human rights. ●● The policy is communicated within the company and publicly. ●● Procedures are established for conducting due diligence, including identifying, preventing, and mitigating risks and accounting for company responses to those risks. ●● Human rights may be integrated into existing systems (relating to, for example, environmental impact, workplace health and safety, anti-corruption) or new procedures established. ●● Responsibility is assigned within the company for implementation of the policy and to make sure the necessary expertise, resources and authority within the company are available to those mandated to follow-up on risks identified through the due diligence process. ●● Decisions and actions are undertaken in response to the identification process to act to prevent infringements of rights, cease activities that are infringing rights and mitigate and remedy the impacts of infringements which have already occurred. Those decisions and actions are integrated to company procedures and are tracked over time. ●● Protections are put in place for whistleblowers and that company grievance or complaints mechanisms and procedures are known by and easily accessible to stakeholders, especially those most at risk from company operations.

17 18 19 15 16

Guiding Principle 17, 17–18. ‘Policy Commitment’ Guiding Principle 16, 16. Guiding Principle 17, 17; Guiding Principle 18, 19. Guiding Principle 19, 20–21; Guiding Principle 22, 24. Guiding Principles 20 and 21, 22–24

Mark B. Taylor - 9781786436405

92  Research handbook on human rights and business ●● Reporting, social dialogue and stakeholder dialogue processes are informed by due diligence findings and actions. The UNGPs state that each company should adapt this general approach to the size and scope of their activities. Large multinationals will require comprehensive due diligence systems integrated into their management systems, whereas small businesses may have smaller risk profiles and should tailor their risk management accordingly.20 It should also be adapted to the nature of the human rights risk in question: the severity of the actual or potential impact on human rights must also be taken into account.21

4.

UNDERSTANDING HUMAN RIGHTS RISKS

Human rights due diligence involves a business in the process of understanding what the company itself does and how its own acts interact with society. If business responsibility for human rights arises from its impacts, then a nexus of actual or potential adverse impacts on human rights is formed by the way in which a particular business activity interacts with a particular human rights context. This nexus of business activity and human rights context generates what the UNGPs refer to as ‘human rights risks’, defined as ‘the business enterprise’s potential adverse human rights impacts’.22 Due diligence activities involve the assessment and management of risks of negative impacts on rights arising from a company’s activities and relationships. Human rights due diligence as defined by the UNGPs is not simply an internal system for compliance with human rights norms. Through the identification of actual or potential adverse impacts, the UNGPs seek to encourage companies to think ahead and manage the ways in which their activities and relationships interact with risks to people. This involves implementing systems which identify sources of risk in society, such as discrimination or vulnerability, and the way in which a company’s activities and relationships might engage with those phenomena. Put simply, human rights due diligence is the practice of a company looking for risks to people which are connected to what the company does, including who it relates to, and taking appropriate action to ensure that those risks do not turn into an adverse impact on people’s rights. If an impact has already happened, the UNGPs make clear that due diligence includes the company taking steps to ‘address’ those impacts, including by mitigating or remediating them.23 This conceptualization of risk prioritizes risks to human rights. This is distinct from approaches which view social risk through a lens concerned with risks posed to corporate purpose, such as profit maximization. It is important to keep this in mind, because some risk assessment systems which address ‘social risk’ do so only to the extent that such risks will 20 ‘Some small and medium-sized enterprises can have severe human rights impacts, which will require corresponding measures regardless of their size.’ Commentary, Guiding Principle 14, 15. 21 ‘Severity of impacts will be judged by their scale, scope and irremediable character.’ Commentary, Guiding Principle 14, 15. 22 Commentary, Guiding Principle 17, 18. ‘A business enterprise’s human rights risks are any risks that its operations may lead to one or more adverse human rights impacts. They therefore relate to its potential human rights impact’ (emphasis in original). Interpretative Guide, pp.6–7. 23 Guiding Principle 13(a), 14; Guiding Principle 19; Guiding Principle 22.

Mark B. Taylor - 9781786436405

Human rights due diligence in theory and practice  93 affect a company’s core objectives.24 However, it is also the case that the existing company systems which address various kinds of social risk – such as impact assessments, health and safety rules, security management protocols – can generate information about human rights risks to people as well as implement important steps in managing those risks. The process of identification involves self-investigation by a company of its activities and relationships with a focus on how those intersect with society. The identification process should seek to identify sources of risk that engage or are engaged by production processes or value chains. The basic elements of the investigative part of HRDD involve mapping the operational context, in particular the intersection of company activities and the geographic footprint of those activities, including partners and suppliers. This entails asking questions about sources of risks that may be connected to the company activity, including both company operations and the socio-economic realities of the geographic context – for example, what countries does a particular value chain encounter? Where are operations or suppliers located? What is the company actually doing and where? What are its business relationships, such as supply chain management, contracting, project development, security, and so on? Potential sources of risk might be as broad as the status of the rule of law or the overall record of human rights in the country, or as specific as working conditions and wage levels in local labour markets or the presence of vulnerable groups. Once the sources of human rights risk have been mapped, the analysis should seek to identify the ways in which company activities and relationships interact in the universe of risk.

5.

DILEMMAS ARISING FROM HUMAN RIGHTS DUE DILIGENCE

The identification of risks arising at the nexus of business and human rights often leads to dilemmas. The definition of a dilemma is a problem for which there are one or more possible solutions, none of which are acceptable. Due diligence will inevitably bring to light dilemmas that arise in the process of value creation. This is because the principal purpose of most companies has traditionally been profit, or the maximization of shareholder value, not respect for human rights. For many companies the effect of the influence of shareholder primacy on decision-making has been to prioritize profit above human rights.25 Dilemmas also arise where national law may contradict international human rights norms. Governments in all regions have been known to violate basic political and civil rights, for example relying on businesses to provide crucial technology, access to information or active collaboration in ways that undermine free speech or freedom of assembly. The UNGPs suggest that companies in those situations should seek to respect international human rights.26

24 Björn Fasterling, ‘Human Rights Due Diligence as Risk Management: Social Risk versus Human Rights Risk’, Business and Human Rights Journal 2, no. 2 (2017): 225–47, https://​doi​.org/​10​.1017/​bhj​ .2016​.26. 25 Beate Sjåfjell and Mark B. Taylor, ‘A Clash of Norms: Shareholder Primacy vs. Sustainable Corporate Purpose’, International Comparative and Corporate Law Journal 13, no. 3 (2019): 41–67. 26 ‘Where the domestic context renders it impossible to meet this responsibility fully, business enterprises are expected to respect the principles of internationally recognized human rights to the greatest extent possible in the circumstances, and to be able to demonstrate their efforts in this

Mark B. Taylor - 9781786436405

94  Research handbook on human rights and business The reality of dilemmas is very real for most companies, not least where they operate in global value chains which connect them to risky production processes. Foreign direct investment in countries seeking to attract investment through race-to-the-bottom-style wage competition tends to result in activities and business relationships which engage with and help to reproduce social problems which are structural in nature and therefore difficult for one company to solve on its own, such as low wages, poor working conditions, the repression of workers’ organizations and vulnerabilities associated with migrant labour. What should a responsible business do when it is not the sole source of a risk or adverse impact or where a structural problem requires collective solutions? The due diligence approach of the UNGPs assumes that engaging with such problems, and with the people affected by them, is an effective form of problem-solving. It also recognizes that dilemmas can offer few good options: withdrawing a contract from a supplier using child labour is one option to reduce the risk of contributing to child labour, but such action is unlikely to solve the particular conditions which give rise to child labour. A company may engage with a supplier to end the hiring of children, but if children are an important source of income for households they will be put to work elsewhere, perhaps in more dangerous jobs. In effect, the company engagement may move children from one form of child labour to a worse form of child labour. It may be more constructive to engage with the supplier to improve wages, limit working hours, allow workers to organize and find educational options for the children or hire other members of the households. In considering every course of action, companies should ask themselves about the consequences, both short-term and long-term, of one course of action or another, and engage with vulnerable people to ensure they are not made worse off.27 The nature of the nexus of business and human rights suggests that social and economic context matters. The significance of context to taking action to ensure business respect for human rights means that companies should look for help or guidance. It may be that other companies are facing similar dilemmas and that companies have a greater chance of solving the dilemma by working together than they do alone. Initiatives in responsible supply chain management have built responses on an industry-wide basis precisely because any one company may not have the purchasing power to influence the entire chain, but collectively they could begin to tackle problems like child labour.28 This is very much the logic of the sectoral due diligence initiatives described in subsequent chapters of this Handbook. Collective action of this sort is one way to build what the UNGPs call ‘leverage’.29 Leverage is an advantage that gives a company the power to influence another through its business relationships. In the context of HRDD, it refers to ‘the ability of a business enterprise to effect change in the wrongful practices of another party that is causing or contributing to an adverse human rights impact’.30 Building leverage is one way to improve one’s ability to deal effectively with dilemmas. regard’: Commentary, Guiding Principle 23. See also UNGPs Interpretative Guidance, Question 83 on ‘Conflicting Requirements’. 27 See ‘D. Issues of Context’, Interpretive Guide. 28 See e.g. Richard M. Locke, The Promise and Limits of Private Power: Promoting Labor Standards in a Global Economy (Cambridge University Press, 2013); see also Lee and Gereffi, ‘Social Upgrading in Mobile Phone GVCs: Firm-level Comparisons of Working Conditions and Labour Rights’, in Dev et al (eds) Labour in Global Value Chains in Asia (Cambridge University Press, 2016). 29 Guiding Principle 19, pp.20–2. 30 Interpretive Guide, p.7; see also Guiding Principle 19, p.21.

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Human rights due diligence in theory and practice  95 Leverage is important in all business relationships. Where risks of association with an adverse impact are detected, companies should seek to increase their leverage within the relevant business relationships, because that will make it easier to prevent or mitigate the risk.31 Leverage is particularly important when adverse impacts have already occurred. Where a company has contributed to those impacts and has stopped doing so, it should seek to mitigate the possibility of adverse impacts by other businesses involved. To do that, the company needs leverage. Similarly, where a company has made no contribution to the impact but is associated with the adverse impact through a business relationship, it will also need leverage in order to influence the behaviour of that business partner.32 Leverage is not just something one business has over another; it is also something a business can create or lose in its relationships with other businesses. Leverage may consist of degrees of a company’s control over a business partner, such as a subsidiary or a sub-contractor or a joint venture partner, and can be measured legally (such as contracts, ownership) or financially (such as the proportion of business, or the promise of future business). Similarly, a company may have the ability to influence others in its sector towards more rights-friendly approaches through, for example, collective action by industry associations, multi-stakeholder initiatives or lobbying governments to set level playing fields through regulation.33 Some situations are simply hard to change and leverage will be limited and hard to create. For example, companies have been compelled by authorities to undertake actions that run the risk of violating rights. When security services order the shutdown of internet services or demand information on activists from telephone service providers, companies are in effect required by law to risk infringing on rights. In such situations, by reporting publicly on the demands made by the authorities, companies provide vital information which can be used by those made vulnerable by the companies’ actions to adapt and limit the harm caused. By tracking their own activities and the interaction of those activities with the social context in which they operate, companies can assess the scope and extent of harms caused and adjust their disclosures accordingly. There are dilemmas that are insoluble for companies on their own. Sometimes the incentives for suppliers to change behaviour do not work, structural socio-economic problems prove resistant to company efforts at change or governments ignore company concerns about human rights. In such situations it may be necessary to exclude a supplier from the company supply chain or end operations in a particular country or project. Some examples of similar dilemmas are discussed below.

Commentary, Guiding Principle 19. Ibid: ‘Where a business enterprise has not contributed to an adverse human rights impact, but that impact is nevertheless directly linked to its operations, products or services by its business relationship with another entity, the situation is more complex. Among the factors that will enter into the determination of the appropriate action in such situations are the enterprise’s leverage over the entity concerned, how crucial the relationship is to the enterprise, the severity of the abuse, and whether terminating the relationship with the entity itself would have adverse human rights consequences.’ 33 Interpretive Guide, p.49. 31 32

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96  Research handbook on human rights and business

6.

REALIZING RESPECT THROUGH RESPONSIBILITY

Under the UNGPs, business responsibility for adverse impacts on human rights arises from business acts. Business is the basis for determining responsibility. The essence of this notion of responsibility is set out under UNGP 13, which elaborates a theory of attribution of human rights responsibility to business entities based on their activity, including their relationships.34 ‘Responsibility’ is defined as a business acting so as to: (a) Avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur; (b) Seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.35

It is important to emphasize that a business can be said to be responsible for those human rights adversely impacted by its activities and relationships. This is an intuitive theory, one which assumes responsibility based on acts – including acts, such as contracts or transactions, which constitute a business relationship. The key concepts here are the notions of causation, contribution and business relationship,36 and the specific manifestations of responsibility to which these forms of responsibility give rise. The implication is that a responsible business does not cause or contribute to an infringement of rights, should act to prevent infringements and should take steps to ‘address adverse human rights impacts with which they are involved’, including by mitigating their impacts. In addition, where an infringement of human rights is merely ‘directly linked’ to company ‘operations, products or services’ through ‘their business relationships’, a business has a different responsibility, namely to ‘seek to prevent or mitigate’ the infringement.37 The Commentary to Guiding Principle 19 explains that causation and contribution to adverse impacts requires a company response to ‘cease or prevent’ the impact.38 The Commentary goes on to explain that ‘direct linkage’ through business relationships ‘is more complex’, requiring the company to consider both its own leverage and the scope for working with others to develop leverage.39 These implications are repeated by Guiding Principle 19, in section B ‘Operational Principles’ Ruggie has referred to the definition of responsibility in Guiding Principle 13 as ‘the central Guiding Principle regarding the corporate responsibility to respect human rights’ (emphasis in the original): John G. Ruggie, ‘Comments on Thun Group of Banks Discussion Paper on the Implications of UN Guiding Principles 13 & 17 in a Corporate and Investment Banking Context’ 21 February 2017, available at www​.ihrb​.org/​uploads/​submissions/​John​_Ruggie​_Comments​_Thun​_Banks​_Feb​_2017​.pdf. 35 Ibid, Guiding Principle 11, pp.14–15. 36 ‘Business relationship’ is sometimes referred to as ‘linkage’, a reference to the phrase in para (b), ‘direct linkage’. That latter phrase is misleading in that it refers to an association with a human rights abuse that is less ‘direct’ than either causation or contribution. 37 Ibid, Guiding Principle 11, pp.14–15. 38 Where a business enterprise causes or may cause an adverse human rights impact, it should take the necessary steps to cease or prevent the impact. Where a business enterprise contributes or may contribute to an adverse human rights impact, it should take the necessary steps to cease or prevent its contribution and use its leverage to mitigate any remaining impact to the greatest extent possible. Leverage is considered to exist where the enterprise has the ability to effect change in the wrongful practices of an entity that causes a harm. Commentary, Guiding Principle 19, pp.21–2. 39 Commentary, Guiding Principle 19, pp.21–2. 34

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Human rights due diligence in theory and practice  97 of the UNGPs, which states that ‘appropriate action will vary’ according to the nature of the causal relationship – causal, contributory or linkage – and the extent to which the company has leverage with respect to the human rights impact at issue. In practice, this means the nature of the value creation activity, the relationships involved and the nexus of both of these to the human rights impacts will be decisive for what constitutes appropriate action. For example, a company may be said to cause a human rights impact by discriminating in its hiring practices, failing to pay owed wages or benefits or restricting the ability of employees to self-organise. Where a company provides logistical support to public security forces in operations in which people are killed or injured, the company may have contributed to those violations. In purchasing product components, a company may find itself linked to negative human rights impacts through its business relationships with factories in other countries. In reality, the distinction between causing, contributing or being linked to negative human rights impacts may be less clear. It is perhaps best to think of these different categories as points on a continuum of responsibility. This is in part because change is constant: the nature of business activities and relationships in contemporary value chains is fluid, with technologies and geographies of production and consumption shifting rapidly. These changes may reflect or cause changes in the universe of human rights risk or the nature of business responsibility for those risks. For example, change can work to distance a company from responsibility, not least through outsourcing functions previously organized internally, such as security for staff. But change can also bring companies closer to the source of the risk: companies linked to forced or child labour through long supply chains may in fact contribute to the conditions which give rise to these forms of labour through their pricing or scheduling practices.40 The UNGPs attempt to reflect the causal distance that a company may have from an adverse impact. This is a very common situation for many companies, for example when that adverse impact is caused by a supplier or sub-contractor who is in a business relationship that is some distance – both physically and legally – from the company. In response to these challenges, Guiding Principle 19 describes ‘[a]ppropriate action’ as being determined on the basis of company causation, contribution or linkage to the infringement, as well as leverage. The UNGPs are clear that the operationalization of responsibility involves preventing or ceasing risky activities, including by ending a business relationship; they also make clear that various forms of leverage may be deployed to try to improve the situation of human rights. The UNGPs provide a framework through which to deliberate and to identify possible actions, but ultimately, decision makers in the company must make judgements about what is the right thing to do. An innovative aspect of the UNGPs’ approach to responsibility lies in its reliance on the activities and relationships of a business as the basis for attributing responsibility for human rights. Early in his UN mandate, Ruggie had indicated to business and civil society stakeholders that, while there seemed to be little dispute about the principle that business should respect human rights, international human rights law did not provide a theory of

40 Ruggie has suggested that a continuum exists between contribution and linkage and that companies can situate their activities along this continuum based on ‘the extent to which a business enabled, encouraged, or motivated human rights harm by another; the extent to which it could or should have known about such harm; and the quality of any mitigating steps it has taken to address it’: John Gerard Ruggie, ‘Comments on Thun Group of Banks Discussion Paper on the Implications of UN Guiding Principles 13 & 17 in a Corporate and Investment Banking Context,’ 21 February 2019.

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98  Research handbook on human rights and business attribution which described how a company could be said to be responsible for human rights.41 A state could be said to be responsible through its duties under international human rights law. But what, he asked, was the corresponding basis for business responsibility? At the time, the notion of ‘sphere of influence’ had been used by Corporate Social Responsibility (CSR) professionals – as well as the Global Compact and the UN Norms42 – as the basis for attributing responsibility to business. Sphere of influence sought to limit company responsibility by suggesting that companies only had responsibility for those human rights over which they might be said to have influence. Ruggie rejected sphere of influence theory on the grounds that it was not suited to globalized commerce in three ways. First, as a spatial metaphor analogous to state territorial jurisdiction but one which lacked a clear boundary, sphere of influence tended to make a priority of proximate issues while at the same time failing to explain why a company should in effect downplay significant human rights impacts at an apparent distance from company operations. As a theory of attribution, sphere of influence failed to make sense in light of the impacts typical of multi-national companies or their association with those impacts, not least through global value chains. Second, sphere of influence conflated what a company ought to do with what it might be able to influence. This encouraged companies to argue they had little influence over violations, while the opposite was often apparent, and it encouraged victims or campaigners to allege company responsibility for harms over which a company had little control. This is not to say these claims and counter-claims were always false. Far from it. But sphere of influence did not lend itself to a common understanding of business responsibility for infringements on human rights. In so doing, it contributed to promoting divergent interpretations of reality, exacerbating conflicts over business human rights impacts, rather than contributing to common understandings and resolutions that offered the possibility of remedy for victims. Finally, by blurring the distinction between a state’s jurisdiction and a company’s sphere of influence, it enabled the governments and businesses to constantly attempt to shift responsibility onto each other, rather than addressing their own roles in the causes of particular categories of violations.43 Instead, Ruggie opted for a theory of attribution based on responsibility arising from business activities and relationships. In short, a business should be responsible for what it does, including to whom it relates – not for activities in an ill-defined space in which it has some influence.44 The activity-based definition of responsibility to respect is a central aspect of the innovation offered by the UNGPs. By dropping the spatial dimension of sphere of influence, Ruggie

Mark B. Taylor, ‘Beyond “Beyond Compliance”: How Human Rights Is Transforming CSR,’ in Atle Midttun (ed.) CSR and Beyond – A Nordic Perspective (Cappelen Damm Akademisk, 2013), p.246, citing a Ruggie mandate consultation in 2006. See also Ruggie, Just Business. 42 ‘Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights’, A/Res. 2003/16, UN Doc.E/CN.4/Sub.2/2003/L.1. 43 Ruggie, Just Business, pp.49–51; see also ‘Clarifying the Concepts of “Sphere of Influence” and “Complicity”, Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, John Ruggie A/HRC/8/16’ (United Nations General Assembly, 15 May 2008). 44 Ruggie did include the notion of power and influence in the Guiding Principles in his use of the term ‘leverage’ with respect to how businesses should respond to the risk of human rights violations. However, this notion of leverage is distinct from the source of business responsibility, which lies in the activities of a business. 41

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Human rights due diligence in theory and practice  99 clarified responsibility as arising from corporate acts. At the same time, by including business relationships, Ruggie’s theory provided the basis for business responsibility to extend across national borders and ‘throughout their operations’ globally.45 This was a key step in designing global norms to address the reality of contemporary trans-national global economic activity, not least the activities of multinational business enterprises. At the same time, through a definition of respect as noninfringement of rights, the UNGPs provided an intuitive foundation for business responsibility as resting on the principle of do no harm.46 This suggested a natural limit important for business: companies would only be responsible for human rights impacts to which they were linked by their activities and relationships, not all human rights violations in a particular country. As described here, it also provided a definition of responsibility which allowed for the unpacking of human rights dilemmas which companies may face.

7.

REALIZING RESPECT THROUGH REGULATION

By offering companies HRDD as a way to manage human rights risks and ensure respect for human rights, the UNGPs in effect designed a form of internal self-regulation, although one based on international human rights norms. Yet, HRDD also provides the basis for regulation external to a company.47 Private or hybrid standards using HRDD have multiplied rapidly since 2011.48 More often than not, these have been formed or authorized by multi-stakeholder processes involving business, civil society, trade unions and governments. Conveners are sometimes market-based organizations, such as the International Standards Organisation or the Global Reporting Initiative, or ad hoc industry groups, such as the Global Network Initiative, but they may also be inter-governmental organizations, such as the UN, EU or OECD.49 These private or hybrid forms of human rights due diligence are most often found in sector-specific initiatives, such as

Guiding Principles 2, 3, 16 and the Commentary to Guiding Principle 11. Also, the interpretive guide defines ‘business relationship’ as ‘those relationships a business enterprise has with business partners, entities in its value chain and any other non-State or State entity directly linked to its business operations, products or services. They include indirect business relationships in its value chain, beyond the first tier, and minority as well as majority shareholding positions in joint ventures’: Interpretive Guide, p.5. 46 ‘There is nothing preventing business doing more to support and promote human rights and practitioners often speak of human rights due diligence as a potentially positive and potentially transformative practice for a business. This does not contradict the fact that the UNGPs notion of respect is based on a negative obligation to do-no-harm – i.e. not infringe on the rights of others – as the starting point, what Ruggie called a “baseline expectation” in which “a company cannot compensate for human rights harm by performing good deeds”’: Taylor (2011) citing Ruggie. 47 Mark B. Taylor, ‘Due Diligence: A Compliance Standard for European Companies’, European Company Law 11, no. 2 (2014): 86–9; Andreas Rühmkorf, ‘From Transparency to Due Diligence Laws? Variations in Stringency of CSR Regulation in Global Supply Chains in the “Home State” of Multinational Enterprises’, Globalisation of Corporate Social Responsibility and Its Impact on Corporate Governance [2018] 177–201, https://​doi​.org/​10​.1007/​978​-3​-319​-69128​-2​_8. 48 Claire Methven O’Brien and Sumitha Shanarajan, ‘The Corporate Responsibility to Respect Human Rights: A Status Review’, Accounting, Auditing and Accountability 29, no. 4 (2016): 542–67. 49 The OECD has developed a series of due diligence guidance documents on variety of industrial sectors: see www​.oecd​.org/​investment/​due​-diligence​-guidance​-for​-responsible​-business​-conduct​.htm. 45

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100  Research handbook on human rights and business textiles, extractive industries or technology. The translation of the UNGPs into specific sectors has been rapid. The translation of HRDD has also occurred in the national policies and law of States. As noted above, a business’s responsibility to respect human rights is independent of the state’s duty to protect human rights, but it is not isolated from it. Guiding Principle 1 describes the duty of States to protect against abuses by businesses as including ‘appropriate steps to prevent, investigate, punish and redress’ human rights abuse ‘through effective policies, legislation, regulations and adjudication’.50 It is arguable that legal reform is becoming increasingly important in this translation of international norms into national standards.51 In 2017 French lawmakers passed legislation which created a duty of care (devoire de vigilance) for the largest companies domiciled in France with respect to human rights and environmental impacts throughout their operations globally.52 The duty is regulated through a new requirement in the commercial code which requires that companies prepare and publish a ‘plan de vigilance’. The plan outlines both risks identified through self-investigation and the measures identified by the company to prevent violations of fundamental rights and freedoms, health and security of people and the environment.53 The original bill referenced the UN Guiding Principles although this language was dropped in the final version. In essence, the law establishes a legal responsibility to respect human rights under French commercial law along the lines defined by the UNGPs. It authorizes a right of civil complaint and judicial review to determine whether the plan de vigilance was appropriate to the risks and to award civil damages where the company actions are found wanting. In the Netherlands, a similar approach was legislated in 2017, involving a legal requirement to develop a plan, reporting and the potential for legal sanctions, but the substantive obligation was with respect to child labour in global supply chains only and not human rights generally.54 At the time of writing, there are public calls for similar legislation in Switzerland,55 Finland, Norway and Germany, as well as at the EU level.56

Guiding Principle 1. See below ‘Due Diligence Developments’; see also Anita Ramasastry, ‘Corporate Social Responsibility Versus Business and Human Rights: Bridging the Gap Between Responsibility and Accountability’, Journal of Human Rights 14, no. 2 (3 April 2015): 237–59. 52 Loi Relative Au Devoir de Vigilance Des Sociétés Mères et Des Entreprises Donneuses D’ordre, Texte Adotpé No 924, 17 février 2017 (accessed 30 September 2017), www​.assemblee​-nationale​.fr/​14/​ ta/​ta0924​.asp. 53 Ibid, ‘les mesures de vigilance raisonnable propres à identifier les risques et à prévenir les atteintes graves envers les droits humains et les libertés fondamentales, la santé et la sécurité des personnes ainsi que l’environnement’. 54 Frequently Asked Questions about the New Dutch Child Labour Due Diligence Law, MWO Platform, 14 April 2017 (accessed April 2019), www​.mvoplatform​.nl/​en/​frequently​-asked​-questions​ -about​-the​-new​-dutch​-child​-labour​-due​-diligence​-law/​. 55 Nicolas Bueno ‘The Swiss Responsible Business Initiative and Its Counter-Proposal: Texts and Current Developments « Law « Cambridge Core Blog’ (accessed 9 May 9 2019), http://​blog​.journals​ .cambridge​.org/​2018/​12/​07/​the​-swiss​-responsible​-business​-initiative​-and​-its​-counter​-proposal​-texts​-and​ -current​-developments/​. 56 Olga Martin-Ortega, ‘Human Rights Due Diligence for Corporations: From Voluntary Standards to Hard Law at Last?,’ Netherlands Quarterly of Human Rights 32, no. 1 (2017): 44–74; see also ‘Mandatory Due Diligence | Business & Human Rights Resource Centre’, accessed 28 May 2019, www​ .business​-humanrights​.org/​en/​mandatory​-due​-diligence. 50 51

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Human rights due diligence in theory and practice  101 Seen against the background of business regulation in general, the deployment of HRDD in national regulation is not surprising. One study found over 100 examples of due diligence in the domestic regulations of 22 countries, although few if any explicitly used the phrase human rights due diligence.57 This research indicated that there are several regulatory approaches through which States encourage and require due diligence by business entities. The four regulatory mechanisms are: (i) positive or negative incentives for business to conduct due diligence; (ii) disclosure of due diligence activities; (iii) measures which require due diligence as the basis for compliance with a legal rule; and (iv) a regulatory mix, a combination of voluntary and mandatory measures that the state uses to encourage business to respect human rights.58 In addition, States also communicate expectations and seek policy coherence through the elaboration of National Action Plans (NAPs) on business and human rights.59 With respect to disclosure (covered further in chapters 6, 9 and 19), States may use legal rules requiring transparency or reporting in order to encourage due diligence. This has been applied by the EU Non-Financial Reporting Directive,60 which requires that member countries implement changes to their domestic regulations requiring companies with more than 500 employees to report on an annual basis. Reports should cover human rights risks as well as impacts on the environment arising from company operations, relationships, products and services. Information must be provided on company policies, due diligence procedures and significant incidents during the reporting period. In the UK and in Australia, legislators have passed Modern Slavery Act (MSA) legislation which, among other provisions, includes a requirement for companies to report on their efforts to monitor their supply chains for signs of forced labour, or to declare they are not taking such measures. Neither act entails the potential for legal sanctions for noncompliance.61 The EU directive operates in a similar manner to disclosure rules in a number of jurisdictions where laws require some form of company reporting with respect to securities or accounting standards, as a source of information which smooth the operations of markets. For example, conflict minerals regulations in the US and EU required companies to report on

57 Olivier De Schutter, Anita Ramasastry, Robert C. Thompson and Mark B. Taylor, ‘Human Rights Due Diligence: The Role of States’ (International Corporate Accountability Roundtable, European Coalition for Corporate Justice, Canadian Network for Corporate Accountability, December 2012). See also Mark B. Taylor, ‘Human Rights Due Diligence: The Role of States – 2013 Progress Report’ (International Corporate Accountability Roundtable, European Coalition for Corporate Justice, Canadian Network for Corporate Accountability, November 2013). 58 De Schutter et al (2012). 59 Kristin Jesnes examined five of the early NAPs and found that the communication of government expectations about corporate behaviour with respect to human rights was an important function of NAPs, in addition to the the four regulatory techniques identified by De Schutter et al. Kristin Jesnes, ‘Statens Plikt Til å Beskytte Menneskerettighetene – En Analyse Av Nasjonale Handlingsplaner for Oppfølging Av FNs Veiledende Prinsipper for Menneskerettigheter Og Næringsliv,’ Fafo Notat (Fafo Research Foundation, 2014). 60 Directive 2014 of the European Parliament and of the Council amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups, A7-0006/52, 4 August 2014. 61 See, e.g., Olga Martin-Ortega, ‘Human Rights Risks in Global Supply Chains: Applying the UK Modern Slavery Act to the Public Sector’, Global Policy 8, no. 4 (2017): 512–21; see also Justine Nolan and Gregory Bott, ‘Global Supply Chains and Human Rights: Spotlight on Forced Labour and Modern Slavery Practices’, Australian Journal of Human Rights 1 (2018): 10.

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102  Research handbook on human rights and business their due diligence with respect to the use of conflict minerals in their supply chains.62 The US Department of State reporting requirements from 2013 required investments in Myanmar exceeding $500,000 to report on company policies and procedures concerning human rights, workers’ rights, anti-corruption, the environment, property acquisition, arrangements with security providers and financial transparency related to operations in Myanmar.63 The language of the rule drew directly from the UNGPs. For example, ‘if the business enterprise has leverage to prevent or mitigate the adverse impact’ the Department encourages businesses to conduct itself in accordance with the UN Guiding Principles and ‘exercise its [leverage]’.64 Where the enterprise is unable to increase its leverage, ‘the enterprise should consider ending the relationship, taking into account credible assessments of potential adverse human rights impacts of doing so’.65 Investors who failed to submit the required reports could be found to be non-compliant and could be subject to civil and criminal penalties for violation of the International Emergency Economic Powers Act.66 In addition to disclosure rules, a second regulatory technique used by States is to provide incentives and benefits to companies in return for their being able to demonstrate due diligence practice. For example, the US Federal Acquisition Regulation (FAR) requires federal government suppliers to certify that they have conducted due diligence with respect to child labour in countries where their products are produced. Similarly, the US Davis–Bacon Act combats social dumping in the US by contractors working on federal construction contracts. Japan, Korea and Taiwan all have so-called green procurement provisions which, for example, give preferential treatment to suppliers who can certify environmentally friendly practices.67 Norway’s export credit agency (GIEK) requires its clients to ensure they have conducted due diligence before granting export insurance. GIEK also conducts its own due diligence concerning potential social (in which it includes human rights) and environmental impacts of any project it supports and will raise risks prior to approving a project, both with the clients as well as with the banks providing financing. GIEK also works to integrate social and economic benchmarks into the loan agreements set down by the banks. The clients are expected to deliver quarterly reports against those benchmarks.68 The laws of many countries impose due diligence requirements on companies as mandatory requirements. These are implemented in law either as an explicit obligation or by offering due

1502 in the US Dodd–Frank Wall Street Reform Act (2010); ‘EU Conflict Minerals Regulation’ EU2017/821 on 17 May 2017; the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters (CCCMC) also developed guidelines. See Olga Martin-Ortega, ‘Human Rights Due Diligence for Corporations: From Voluntary Standards to Hard Law at Last?’ Netherlands Quarterly of Human Rights 32, no. 1 (2017): 44–74. 63 US Department of State, Reporting Requirements on Responsible Investment in Burma, www​ .humanrights​.gov/​wp​-content/​uploads/​2012/​07/​Burma​-Responsible​-Investment​-Reporting​-Reqs​.pdf. 64 US Department of State, Responsible Investment Reporting Requirements Frequently Asked Questions (23 Sep 2013), www​.humanrights​.gov/​2013/​09/​23/​responsible​-investment​-reporting​ -requirements​-frequently​-asked​-questions/​#Question2. 65 Ibid, citing the Commentary to UN Guiding Principles (2011), Principle 19. 66 Office of Foreign Assets Control’s Economic Sanctions Enforcement Guidelines, 74 Fed. Reg. 57,593 (9 Nov 2009). 67 De Schutter et al (2012) pp.33–7. 68 Mark B. Taylor, ‘Kartlegging og Avviksanalyse: Statens Plikt Til å Beskytte; Kartlegging Og Avviksanalyse Som Grunnlag for Nasjonal Handlingsplan for Oppfølging Av FNs, Guiding Principles on Business and Human Rights,’ Fafo-notat, 2013, http://​www​.fafo​.no/​pub/​rapp/​10178/​index​.html. 62

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Human rights due diligence in theory and practice  103 diligence as a defence for use by companies against charges of criminal, civil or administrative wrongs. Examples include various forms of integrity due diligence required under anti-bribery laws in many OECD countries, or know your customer (KYC) due diligence conducted by financial institutions to identify risks of money laundering activities.69 In the environmental sphere, countries frequently require environmental impact assessments as the basis for granting licences for certain projects.70 Labour codes may require companies to have workplace health and safety practices in place and, in the event of a workplace incident, may demand to see evidence of company practice in this regard as part of assessing compliance with labour codes.71 In civil litigation, due diligence has long been a way for companies to implement their duty of care. Increasingly, human rights and environmental due diligence is being referred to by the courts in assessing whether or not a company has taken sufficient steps to meet its obligations in this regard. This is true in both common law jurisdictions such as the UK and in civil law countries such as the France and Netherlands.72 Finally, States may also combine disclosure, benefits and compliance approaches in order to construct an incentive structure that promotes due diligence by companies to ensure they respect standards set down in law. For example, administrative rules governing environmental protection, labour rights, consumer protection or anti-corruption may require business due diligence as the bases for a licence or approval, and may also require regular reporting disclosure of due diligence activities by business. Enforcement of such rules can combine administrative penalty (fines), criminal law sanctions and the possibility of civil action, in which due diligence can be a defence. This form of regulation known as a ‘smart mix’ is explicitly anticipated by the UN Guiding Principles.73 Some more recent regulatory developments are described below.

8.

DUE DILIGENCE CRITIQUE

The trend towards the use of due diligence in national regulation has given rise to debates about the precise nature and function of human rights due diligence, both in law and in practice. One line of critique has been operational, pushing back against the idea that human rights due diligence is easily integrated into existing risk management systems deployed by companies.74 This critique is based on the argument that the concept of social risk, as deployed by internal risk management systems, is constrained by corporate purpose and is therefore inconsistent with the normative application of human rights to company operations. In other words, because standard company approaches define social risk as risks to the company which arise from society, the internal systems for assessing and managing social risk are by defini-

For example, such countries as China, Germany, India, South Africa, the United States and New Zealand: De Schutter et al (2012), p.22. 70 For example, US, Germany, Canada: De Schutter et al (2012), p.21. 71 See, e.g., Canadian labour law, An Act to Amend the Criminal Code (Westray Bill), S.C. 2003, c. 21 (Can.). 72 For specific examples of due diligence as a standard of compliance in criminal, civil and administrative law see De Schutter et al (2012), pp.11–28. See also Robert McCorquodale et al, ‘Human Rights Due Diligence in Law and Practice: Good Practices and Challenges for Business Enterprises §’, Business and Human Rights Journal 2, no. 2 (2017): 195–224. 73 Commentary, Guiding Principle 3. 74 Fasterling (2017). 69

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104  Research handbook on human rights and business tion incapable of shaping company behaviour to ensure company respect the rights of people. This has important implications for the ways in which companies prioritize and monitor risk, as well as for optimistic scenarios which suggest there is a ‘business case for human rights’.75 However, there is evidence that, despite these differences in management systems, human rights due diligence as a method has made inroads to company systems and industry standards.76 A similar line of critique has come from industry actors who have resisted HRDD on the grounds that it is a burdensome requirement, or that it was not applicable to all business. For example, US industry associations fought the imposition of conflict minerals due diligence reporting provided for under provision 1502 of the Dodd–Frank Wall Street Reform Act: the US Chamber of Commerce and the National Association of Manufacturers sued the Securities and Exchange Commission (SEC) over the provision arguing it imposed an unfair cost on US business.77 A 2013–18 OECD process aimed at defining the human rights obligations of financial institutions saw some institutional investors attempt to argue that responsibility could only arise for their own activities, and not for those companies in which they owned a minority of shares. In effect, this was an argument against the notion of linkage as defined by the UNGPs as arising from a business relationship and asserting that responsibility for shareholders could only arise where they caused or contributed to human rights abuses ‘by their own activities’.78 This effort to re-define one of the key norms at the heart of the UNGPs failed: the final OECD guidance for institutional investors adopted a definition of responsibility coherent with the UNGPs. This, in turn, has influenced regulation in Europe, where the EU Parliament passed the Regulation for Sustainability-related Disclosures in the Financial Services Sector (2019) which specifically references the OECD guidance.79 A third line of critique has suggested the UNGPs themselves do not distinguish between the role of due diligence as management process as distinct from due diligence as a standard

Ibid, pp.231–9. McCorquodale et al surveyed 150 companies and found about half of those surveyed had conducted HRDD, that there were significant variations between sectors and that many were familiar with due diligence as a process from ethical, environmental or labour-oriented risk management in, for example, antibribery due diligence, environmental impacts assessments and workplace health and safety measures. Robert McCorquodale et al, ‘Human Rights Due Diligence in Law and Practice: Good Practices and Challenges for Business Enterprises’, Business and Human Rights Journal 2, no. 2 (2017): 195–224, https://​doi​.org/​10​.1017/​bhj​.2017​.2.; See also Karin Buhmann, ‘Analysing OECD National Contact Point Statements for Guidance on Human Rights Due Diligence: Method, Findings and Outlook’, Nordic Journal of Human Rights 36, no. 4 (2018): 390–410, https://​doi​.org/​10​.1080/​18918131​ .2018​.1547526. 77 A US court struck down the provision of the rules requiring companies to declare their products ‘conflict free’, but permitted the provisions requiring supply chain due diligence and reporting. In 2018, the SEC signalled it would no longer enforce the reporting provision. 78 Thun Group of Banks, ‘Discussion Paper on the Implications of the UN Guiding Principles 13 & 17 in a Corporate and Investment Banking Context’, 2017. See also the response from John Ruggie (2017). 79 ‘European Parliament legislative resolution of 18 April 2019 on the proposal for a regulation of the European Parliament and of the Council on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341 (COM(2018)0354 – C8-0208/2018 – 2018/0179(COD))’. 75 76

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Human rights due diligence in theory and practice  105 of conduct in law.80 The critique suggests that this lack of clarity in the UNGPs runs into two important risks. The first is the risk of creating the false impression that merely by implementing human rights due diligence a company will have met its responsibility to respect human rights. As noted above, companies respect rights by not infringing on rights. While the UNGPs make clear that due diligence is an operationalization of that responsibility to not infringe on rights, due diligence itself is not fulfilment of the responsibility to respect. Rather, due diligence is one way that responsibility can be fulfilled. For example, it is entirely possible – arguably it is quite likely – that a textile company can implement ongoing human rights due diligence on its supply chain, and manage it diligently, only to find that child labour has appeared in its supply chain from one day to the next.81 That company is both implementing due diligence and contributing to an adverse human rights impact. The second risk arises from the use of HRDD as a legal standard. As noted above, due diligence is commonly used as evidence of conduct that regulators or the courts use to measure company compliance against a standard. But the UNGPs are mostly silent on the role of due diligence in national-level regulation.82 In their silence on the regulatory functions of due diligence, the argument goes, the UNGPs create the potential for confusion about how to attribute responsibility for human rights impacts to business.83 Should businesses be held strictly liable for the infringements of rights which they cause or to which they contribute? How should infringements by third parties be attributed to businesses? The debate over theory of attribution has become more material in recent years, as courts in several countries have taken decisions that suggest an increased openness to litigation seeking to establish corporate accountability for human rights impacts. For example, in 2019, in Vedanta v Longowe, the UK Supreme Court ruled that the UK courts could accept jurisdiction in a suit by Zambian farmers who allege that water pollution caused by a copper plant owned by a subsidiary of the UK company Vedanta harmed health and livelihoods. In the same year, a Dutch court ruled that it had jurisdiction to hear allegations of complicity on the part of Shell, which is headquartered in The Hague, in the killing of the Ongoni Nine activists by the Nigerian regime in the 1990s. Also in 2019, Lundin Oil faced criminal charges in a Swedish court in connection with allegations of complicity in war crimes committed by government forces in Sudan during the civil war in that country at the turn of the century. Earlier that same year, former executives of the Ford Motor Company in Argentina were convicted for their 80 Jonathan Bonnitcha and Robert McCorquodale, ‘The Concept of “Due Diligence” in the UN Guiding Principles on Business and Human Rights’ European Journal of International Law 28, no. 3 (2017) 899–919; John Gerard Ruggie and John F. Sherman III, ‘The Concept of “Due Diligence” in the UN Guiding Principles on Business and Human Rights: A Reply to Jonathan Bonnitcha and Robert McCorquodale’, European Journal of International Law 28, no. 3 (2017) 921–8; Jonathan Bonnitcha and Robert McCorquodale, ‘The Concept of “Due Diligence” in the UN Guiding Principles on Business and Human Rights: A Rejoinder to John Gerard Ruggie and John F. Sherman, III’, European Journal of International Law 28, no. 3 (2017) 929–33. 81 There could be any number of explanations for this, from imperfect knowledge to the fact that suppliers often change. 82 Ruggie and Sherman argue the UNGPs are better understood as an attempt to develop a global social norm rather than an international legal one: John Gerard Ruggie and John F. Sherman, ‘The Concept of “Due Diligence” in the UN Guiding Principles on Business and Human Rights: Reply to Professors Bonnitcha and McCorquodale’, European Journal of International Law, https://​papers​.ssrn​ .com/​abstract​=​2997128. 83 Bonnitcha and McCorquodale (2017).

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106  Research handbook on human rights and business part in the killing and torture trade union activists during that country’s counter-insurgency or ‘Dirty War’ in the 1970s. Similar cases have reached various stages in the civil (tort) or criminal courts in Canada, France and the United States. Together, these formed part of a steady trickle of cases seeking to establish accountability for corporate involvement in human rights abuses. They have emerged alongside a parallel wave of cases seeking corporate accountability for climate impacts.84 It should be cautioned that such cases have been filed before the courts of different countries for several decades, but to little legal effect. In addition, legal practitioners have already expressed the concern that this turn to corporate accountability could create perverse incentives. For example, instead of adopting a due diligence process to ensure respect for human rights throughout its operations, multinationals may avoid implementing group-wide or supply chain human rights due diligence, lest the knowledge generated by the due diligence process be used in court to meet tests for the subjective elements of tort or criminal cases, that is, as evidence of knowledge or intent.85 The results of these cases will play an important part in answering questions about the nature and role of due diligence in regulatory settings. Whether human rights due diligence is a part of company systems or not, and regardless of whether such cases use the term ‘human rights’ or not, these cases inevitably pose questions about the corporate practices which human rights due diligence is intended to improve. For example, tort claims may require consideration of the extent to which a company acted with due diligence to implement a duty of care to respect human rights. Similarly, criminal courts may be asked to translate international criminal law norms into domestic liabilities for companies.86 Developments in the courts and in government regulation will be important in clarifying due diligence best practice, in part because business practice appears to be lacking. Citing publicly available assessments, the UN Working Group on Business and Human Rights reported in 2018 that ‘the majority of companies … do not demonstrate practices that meet the requirements set by the Guiding Principles’.87 The Working Group also found state practice to legislate due diligence to be inadequate and attempts to regulate to improve transparency of business activity with respect to human rights to be ‘patchy’.88

Mark B Taylor, ‘Litigating Corporate Sustainability – Towards a Taxonomy of Transnational Liability Risk’, forthcoming research paper. 85 ‘By basing a duty of care – leading to potential liability – on how closely a parent company supervises its subsidiary, Vedanta incentivizes parent companies to take a hands-off approach.  The fewer group-wide policies they adopt, and the less they attempt to implement them, the less likely they are to owe a duty of care.  The safest path for them to avoid liability is to see no evil and hear no evil.’ Doug Cassel, ‘Vedanta v. Lungowe Symposium: Beyond Vedanta – Reconciling Tort Law with International Human Rights Norms’, Opinio Juris (blog, 19 April 2019), https://​opiniojuris​.org/​2019/​04/​19/​vedanta​-v​ -lungowe​-symposium​-beyond​-vedanta​-reconciling​-tort​-law​-with​-international​-human​-rights​-norms​%ef​ %bb​%bf/​. 86 Robert C. Thompson, Anita Ramasastry and Mark Taylor, ‘Translating Unocal: The Expanding Web of Liability for Business Entities Implicated in International Crimes,’ George Washington International Law Review 40, no. 4 (2009): 841–902. 87 UN Doc. A/76/163 July 2018 para. 25. 88 Ibid, para. 32. 84

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Human rights due diligence in theory and practice  107

9. CONCLUSION HRDD is a particular form of due diligence. As formulated by the UNGPs, it is designed to identify the risk of negative impacts by companies on rights and freedoms enjoyed by people and to enable action to ensure respect for those rights and freedoms. Human rights due diligence is designed to have a global scope, one that is entirely appropriate to the transnational nature of contemporary processes of value creation. HRDD not only encompasses the investigation and the identification of risk, which is a practice common to other forms of due diligence, but describes the internal system needed to properly transform business practice towards ongoing respect for human rights. The UNGPs are international norms, the binding nature of which will be determined by national legislation, regulation and adjudication, for it is under national laws that companies are regulated: it is at the national level where courts and regulators enforce corporate compliance and it is States that are the principal duty bearers with respect to human rights protections agreed internationally.89 This reality of evolving transnational responsible business standards suggests that the ways in which human rights due diligence will be regulated and enforced will display significant levels of diversity, even as the core elements of due diligence – self-assessment, actions to respond to risks detected, accounting for those actions – are likely to remain at the heart of definitions of responsible business. HRDD assumes that a nexus is formed by the interaction of company activities and relationships with a particular social context. HRDD is a way for a company to manage the risk that this nexus gives rise to human rights impacts. HRDD operationalizes a theory of responsibility which is centred on company impacts on rights and freedoms. That approach not only establishes a respect for human rights as a minimum standard of company behaviour, it also enables companies to defend themselves against claims of responsibility for violations that are unconnected to their activities or their business relationships. But where companies cause, contribute or are linked to human rights impacts through their business relationships, the standards established by the UNGPs require them to bring their operations back into compliance with their responsibility to respect human rights in order to be considered a responsible business. Failure to do so is increasingly likely to cause companies to run afoul of regulations emerging in a number of countries.

89 The principles of subsidiarity and comity ensure that international tribunals are the exceptions which prove this rule.

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6. Human rights due diligence and the (over) reliance on social auditing in supply chains Justine Nolan and Nana Frishling

1.

INTRODUCTION: GLOBAL SUPPLY CHAINS AND THE RISE OF HUMAN RIGHTS DUE DILIGENCE

Global supply chains have become a central feature of today’s globalized economy. They ‘account for more than 450 million jobs worldwide’.1 Corporations, large and small, relentless in their pursuit of new markets, new technologies and lower production costs, have grown increasingly reliant on complex global supply chains to manufacture and distribute their goods. The preponderance of supply chains is evident in developing, emerging and developed economies.2 In most industries, companies now rely on a series of contractors and suppliers in a range of countries to produce and transport their products. However, this fragmented nature of production carries with it both benefits and risks. Job creation, increased foreign investment and skills and technology transfer are all potential advantages resulting from the spread of supply chains. However, as noted by the Organisation for Economic Co-operation and Development (OECD), ‘balancing economic growth and sustainability goals linked to global supply chains also presents challenges’.3 While elongated and often complex supply chains are a crucial feature of the global economy, too often such production chains prize low cost and fast production over respect for basic labour rights. However, increasing acknowledgement of companies’ responsibility to respect human rights is making it more difficult for businesses to disassociate themselves from the dangerous working conditions that are too often a feature of their global supply chains. Furthermore, human rights responsibilities cannot be compartmentalized to a specific company or within particular geographical boundaries because direct and indirect corporate linkages that permeate global supply chains exacerbate the issues. Human rights due diligence – an integral component of the UN Guiding Principles on Business and Human Rights (the Guiding Principles)4 – is increasingly seen as the primary ‘Towards an Inclusive Future: Shaping the World of Work’ (G20 Labor and Employment Ministers Meeting, Ministerial Declaration, 2017) para 20. 2 Organisation for Economic Co-operation and Development (OECD), ‘Participation of developing countries in global value chains: Implications for trade and trade-related policies’ (Summary Paper of OECD Trade Policy Paper’, No 179, OECD, Paris 2015) . 3 OECD (with contributions from ILO, IMF, and World Bank Group) ‘Promoting Sustainable Global Supply Chains: Developing International Standard, Due Diligence and Grievance Mechanisms’ (Hamburg, Germany 15–17 February 2017) 5. 4 Human Rights Council, ‘Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework: Report of the Special Representative of the Secretary-General on the issue of Human Rights and Transnational Corporations and Other Business Enterprises’ (A/HRC/17/31, 21 March 2011) (Guiding Principles). 1

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Human rights due diligence and the (over) reliance on social auditing  109 tool to address such issues, with both government and business responsible for its development and implementation. At a meeting of the G20 group of countries in 2017,5 there was acknowledgement of the ‘responsibility of business to exercise due diligence’, along with the responsibility of governments to ‘communicate clearly on what we [government] expect from businesses with respect to responsible business conduct’.6 Government action to encourage companies to respect human rights should include providing clarity around concepts such as due diligence and setting standards for communicating these efforts to the broader community. This chapter elaborates on the continuing refinement of the parameters of due diligence and highlights some of the emerging best practice standards, such as the recent guidelines published by the UN and OECD.7 It then turns to examining how human rights due diligence is actually being implemented in practice and whether the principles are being transformed into practice. Evidence suggests that companies are primarily relying on social auditing as the mechanism for implementing due diligence. We argue that the continued reliance on social auditing as a primary tool for conducting due diligence is not likely to lead to better outcomes for the rights of supply chains workers because social auditing is, in and of itself, an ineffective tool for achieving meaningful and consistent human rights improvements. 1.1

Refining the Concept of Due Diligence

The concept of due diligence was introduced in the Guiding Principles as a mechanism by which companies might discharge their responsibility to respect rights, and reflects the continued reliance on what had been, as at and prior to 2011, when the principles were introduced, a largely self-regulatory process to curb corporate human rights violations.8 A key feature that distinguishes human rights due diligence from traditional corporate due diligence is that human rights due diligence focuses primarily on detecting the risks that the company may impose on others, as opposed to risks to the company. As such, human rights due diligence is designed to be an ongoing interactive mechanism that keeps the company apprised of its impact on workers, the community and a broader set of stakeholders. Due diligence as set out in the Guiding Principles applies to a range of situations in which businesses may potentially impact human rights, but one of the most common (and significant) human rights challenges faced by business today is that associated with their reliance on global supply chains. The Guiding Principles specifically state that such due diligence should extend beyond a company’s direct impacts and include impacts which ‘may be directly linked to its operations, products or services by its business relationships’, thus including its supply chain. Since the advent of the Guiding Principles in 2011, there have been significant advances in further defining and refining the concept, and, in some select cases, legally mandating companies to conduct such assessments. Recently, guidance has begun to emerge (developed The G20 (or Group of Twenty) is an international forum for governments and central bank governors from 20 major economies (19 countries plus the European Union). 6 ‘Towards an Inclusive Future: Shaping the World of Work’ (n 1) para 27. 7 Noting that in 2011, the OECD aligned its OECD Guidelines for Multinational Enterprises with the Guiding Principles by specifically incorporating the notion of human rights due diligence into a new human rights chapter (Chapter IV): OECD (2011), OECD Guidelines for Multinational Enterprises, OECD Publishing (OECD Guidelines). 8 Human Rights Council (n 4) Principle 15(b), 17–21. See Chapter 5 for an overview of human rights due diligence. 5

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110  Research handbook on human rights and business by both state and non-state actors) which attempts to outline what a comprehensive supply chain due diligence programme could or should look like. Such developments were welcomed at the G20 summit in 2017, where members noted that they support ‘initiative[s] to facilitate industry-wide due diligence and to harmonise audit standards, and … sector specific dialogues’.9 The OECD has been particularly active in this space and in 2016 and 2017 released updated sector specific guidelines for conducting due diligence for responsible supply chain management of conflict minerals, for the garment and footwear sectors and another for agricultural supply chains.10 The OECD guidelines set up a best practice standard for corporate initiated due diligence and one of the benefits of the guidance documents is the specificity and detail they provide for implementing due diligence in specific sectors. The OECD guides stress the need for companies to adopt a collaborative approach and the Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector emphasizes that due diligence is both an interactive and shared process, noting that enterprises ‘should engage meaningfully with affected stakeholders as part of the due diligence process. Such engagement should be two-way, conducted in good faith and responsive.’11 The OECD advises that business should engage with other companies in the sector, with relevant multi-stakeholder initiatives (MSIs) and directly with workers and their chosen representatives such as trade unions.12 This sector-specific shared approach to human rights due diligence is exemplified by the Dutch Agreement on Sustainable Garment and Textile, established in 2016.13 It is a sector-based agreement between sector associations, member companies, government, trade unions and civil society organizations through which they work together to identify and address risks to human rights (including labour rights), environmental impacts, impacts related to corruption and taxation practices and other negative impacts covered by the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles. Through policies such as this, the Dutch government aims to encourage the implementation of due diligence on a voluntary basis in (eventually) several other Dutch sectors, including agriculture, chemicals, construction, electronics, energy, food, metals, oil and gas, retail, wholesale and wood and paper products. To date, two agreements have been reached, one in the garment and textile sector and the other in banking.14

‘Towards an Inclusive Future: Shaping the World of Work’ (n 1) para 27. OECD, ‘OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas’ (Third Edition (OECD Mining Guidance), OECD Publishing, Paris 2016) ; OECD, ‘OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector’ (OECD Apparel Guidance 2017); and OECD/FAO, ‘OECD-FAO Guidance for Responsible Agricultural Supply Chains’ (OECD Publishing, Paris 2016) (OECD Agricultural Guidance). The OECD has also published a due diligence guide for the financial sector: OECD (2017), ‘Responsible Business Conduct for Institutional Investors: Key Considerations for Due Diligence under the OECD Guidelines for Multinational Enterprises . 11 OECD Apparel Guidance (n 10) 23. 12 OECD Apparel Guidance (n 10) 24–26. 13 Dutch Agreement on Sustainable Garment and Textile (2016) . 14 Dutch Banking Sector Agreement on International Responsible Business Conduct Regarding Human Rights (October 2016) . 9

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Human rights due diligence and the (over) reliance on social auditing  111 Complementing the sector-specific approach, the OECD has also published a comprehensive general due diligence guide, intended to apply across sectors (OECD General Guidance),15 while in 2018 the UN issued further guidance highlighting the key components of due diligence, as well as emerging practice (UN Guidance).16 Alongside these high level governmental and inter-governmental-led efforts to encourage voluntary due diligence are guidelines that have been developed by civil society to further define and refine human rights due diligence. For example, the Ethical Trading Initiative has developed a Human Rights Due Diligence Framework, the Danish Institute for Human Rights has its Human Rights Impact and Assessment Guidance and Toolbox, and Shift has also developed guidance around due diligence.17 This slow and steady evolution of voluntary corporate initiated human rights due diligence initiatives that have built on and further refined the basic guidance provided in the Guiding Principles is now being supplemented in select jurisdictions with legislation mandating greater transparency around supply chains and, in some (rare) cases, legislation requiring due diligence. In the past decade or so, several jurisdictions – including, for example, the United Kingdom (UK), France, Denmark, India and China – have introduced mandatory corporate social responsibility reporting requirements,18 although these laws do not specifically contemplate human rights due diligence.19 The UK, California and Australia have introduced laws – the Modern Slavery Act 2015 (UK), the California Transparency in Supply Chains Act of 2010 and the Modern Slavery Act (Cth) 2018 – requiring large companies to publicly disclose the steps they are taking to eradicate slavery and human trafficking from their supply chains.20 Yet they do not impose a requirement on companies to undertake due diligence.21 Rather, companies must simply report on the extent to which they have done so, and clearly indicate if they have not. Similarly,

15 OECD, ‘Due Diligence Guidance for Responsible Business Conduct’ (OECD General Guidance 2018). 16 United Nations General Assembly, Report of the Working Group on the Issue of Human Rights and Transnational Corporations and other Business Enterprises (UN Doc A/73/163, 16 July 2018) (UN Guidance). 17 See: ; ; and Shift, Respecting Human Rights through Global Supply Chains (Shift Workshop Report No. 2, October 2012)’, . 18 Barnali Choudhury, ‘Social Disclosure’ (2016) 13 Berkeley Business Law Journal 183, 189–95. 19 This earlier French reporting legislation is distinct from the more recent French Corporate Duty of Vigilance Law 2017 (discussed at n 32). 20 Modern Slavery Act 2015, c. 30) (UK), s.54 and California Transparency in Supply Chains Act, Ca. Civ. Code § 1714.43. The UK Act applies to companies that conduct business in the UK with turnover greater than £36 million. The California Act applies to retailers and manufacturers doing business in California with annual worldwide gross receipts greater than US$100 million and the Australian Act applies to business entities who meet the reporting threshold of AUD$100 million of annual consolidated revenue. 21 Recent litigation in the US has confirmed this approach: Sud v Costco Wholesale Corporation [24 January 2017] United States District Court, N.D, California, Case No. 15–cv–03783–JSW. See also Melanie Barber et al., Plaintiffs v Nestlé USA, Inc., a Delaware Corporation; and Nestlé Purina Petcare Co., a Missouri Corporation, Defendants [9 December 2015] United States District Court, C.D. California, Southern Division. Case No: SACV 15–01364–CJC(AGRx).

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112  Research handbook on human rights and business the European Union’s Directive 2014/95/EU (EU Directive), effective from 2017, requires companies with more than 500 employees to report on how they manage human rights risks,22 including in their supply chains.23 Specifically, companies must provide a description of their relevant policies, including due diligence processes, the outcomes of those policies, principal human rights risks, how they are managed, and key performance indicators. The EU Directive is broader than the UK, California and Australian Acts in that it applies to all human rights impacts, not just slavery and trafficking, and mandates specific information that must be reported.24 Yet like these Acts, the EU Directive does not actually require companies to undertake due diligence.25 The rationale behind these types of reporting requirements is that the reputational implications of forced disclosure will compel companies to undertake human rights due diligence.26 Yet a review by the UK Joint Committee on Human Rights challenges this assumption. The Committee cited evidence that 35 per cent of statements under the UK Slavery Act did not discuss risk assessment processes, and two thirds of statements did not identify priority risks.27 Rather, most companies were simply disclosing general information about their policies.28 Ultimately, the Joint Committee recommended the introduction of legislation mandating human rights due diligence.29 To date, only France has introduced a comprehensive and mandatory human rights due diligence law.30 The Corporate Duty of Vigilance Law 2017 requires large French companies to identify and prevent adverse human rights (and environmental) impacts, including those

The Directive also requires reporting on other matters, such as the environment, social and employee matters, anticorruption and bribery. It is estimated that the new Directive will apply to 8,000 EU companies: European Coalition of Corporate Justice, The French Duty of Vigilance Law – Frequently Asked Questions (23 February 2017), (French Law FAQ). 23 Although the EU Directive does not specifically refer to supply chains, the definition of risk contemplates business relationships that are likely to cause adverse impacts on human rights. 24 The UK Modern Slavery Act suggests the type of information that companies may provide, but do not require it. The California Supply Chain Act mandates a minimum level of information that must be disclosed, however this is less onerous than the information required by the EU Directive. 25 Although the EU Directive does go somewhat further in that companies that do not undertake human rights due diligence must ‘provide a clear and reasoned explanation for not doing so’. 26 See for example, UK Parliamentary debate on the Modern Slavery Bill: Baroness Kennedy of Cradley, House of Lords Hansard, 30 October 2014, Volume 756, Column 1400–1403. 27 Ergon Associates, Reporting on Modern Slavery: The Current State of Disclosure (May 2016) 1: cited in House of Lords, House of Commons Joint Committee on Human Rights, Human Rights and Business 2017: Promoting Responsibility and Ensuring Accountability (Sixth Report of Session 2016–17 HL PAPER 153, HC 443, 5 April 2017) (UK Joint Committee Report) 37–38. 28 Written Evidence from the Equality and Human Rights Commission in the UK (Joint Committee Report n 28) 38. 29 UK Joint Committee Report (n 27) 59. 30 There are other more limited examples of mandatory due diligence laws, however these tend to apply to specific sectors or issues. See for example, the US Dodd–Frank Wall Street Reform and Consumer Protection Act which applies to conflict minerals originating from the Democratic Republic of Congo. Also for an example of a best practice sector-specific domestic law, see Australia’s Illegal Logging Prohibition Act 2012 (Cth) which obligates the importers and processors of timber into Australia to initiate due diligence processes in order to ensure the imported timber was not illegally logged. 22

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Human rights due diligence and the (over) reliance on social auditing  113 resulting from their supply chains.31 Specifically, companies must implement, and report annually on, a ‘vigilance plan’ in line with the Guiding Principles’ concept of due diligence. The plan must assess the company’s human rights risks, as well as risks associated with its subsidiaries, subcontractors or suppliers with whom the company maintains an established business relationship. Once identified, companies are required to take appropriate action to mitigate risks or prevent serious violations, to create risk alert mechanisms in conjunction with trade unions and to monitor and assess the efficiency of their measures. Interested parties may enforce non-compliance with the law through the courts.32 This law represents the most promising advance to date in mandating human rights due diligence, although its enforceability and impact on practice remains to be seen. The Dutch parliament has adopted a new Child Labour Due Diligence Law (Wet zorgplicht kinderarbeid, 2019) that will require companies selling products or services to Dutch end-users to identify whether child labour is present in their supply chain and, if this is the case, to develop a plan of action to address it and issue a due diligence statement. In addition, there are several other laws in progress, the most advanced being the one under consideration in Switzerland. Switzerland has been debating two competing legal proposals which aim to introduce mandatory human rights due diligence for parent companies. The Swiss Responsible Business Initiative was the product of a popular initiative proposed in 2016 by more than 80 civil society organizations and will be voted on in a public referendum in 2020. In December 2019, the Council of States of the Swiss Parliament adopted a Counter Proposal which provides only for a non-financial reporting duty and a due diligence requirement limited to risks associated with child labour and conflict minerals. It does not include the liability provisions proposed in the Responsible Business Initiative. This Counter Proposal will still need to be considered by the National Council and the Responsible Business Initiative is still continuing to be debated. Given the preponderance of due diligence guidance that has emerged in recent years, the question that follows is to what extent, and how, are corporations implementing due diligence in practice? The following discussion focuses on what is arguably the most ubiquitous human rights risk faced by companies across industries and sectors today: the growing reliance on complex global supply chains. Thus, the question becomes: how are corporations, in practice, conducting due diligence in respect of their supply chains?

The law applies to any company established in France with at least 5,000 employees within the company head office and its direct and indirect subsidiaries, whose head office is located on French territory, or that employs at least 10,000 employees within the company and its direct and indirect subsidiaries, whose head office is located on French territory or abroad. It has been estimated that about 100–150 companies currently meet this definition: French Law FAQ, n 22. 32 Judges were initially granted the power to impose fines for failure to implement a plan, ranging from 10 to 30 million euros; however this was struck down by the French Constitutional Court: European Coalition for Corporate Justice, ‘Last hurdle overcome for landmark legislation: French Corporate duty of vigilance law gets green light from Constitutional Council’ (24 March 2017) . 31

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2.

HUMAN RIGHTS DUE DILIGENCE IN PRACTICE: THE STATE OF HUMAN RIGHTS DUE DILIGENCE REPORTING

The ability to assess the current state of human rights due diligence practice is heavily dependent upon the extent to which businesses are communicating how they are addressing their human rights impacts. A first step towards improving transparency in global supply chains is to require corporations to ‘provide greater levels of detail about the exact provenance of their products and to make specific data available as a public good’.33 While reporting, by itself, does not guarantee a shift in accountability, it does empower stakeholders with information about how the company addresses human rights concerns within its business relationships.34 A number of frameworks have emerged to assist companies in this regard,35 but human rights due diligence reporting remains at a nascent stage. The most significant reporting frameworks considering human rights due diligence today are the Global Reporting Initiative’s (GRI) Standards,36 as well as the UNGP Reporting Framework (UNGPRF),37 both of which were developed through extensive multi-stakeholder consultation processes.38 In addition, the Corporate Human Rights Benchmark (CHRB) assesses companies on their human rights performance – including human rights due diligence

Stephen John New, ‘Modern Slavery and the Supply Chain: The Limits of Corporate Social Responsibility’ (2015) 20(6) Supply Chain Management: An International Journal 697, 703. 34 Amol Mehra and Sara Blackwell, ‘The Rise of Non-financial Disclosure: Reporting on Respect for Human Rights’ in Dorothee Baumann-Pauly and Justine Nolan (eds), Business and Human Rights: From Principles to Practice (Routledge 2016) 276. 35 There are now a multitude of reporting frameworks that cover social sustainability (including human rights impacts), as well as benchmarks that seek to assess the social performance of companies: see Casey O’Connor and Sarah Labowitz, ‘Putting the “S” in ESG: Measuring Human Rights Performance for Investors’ (NYU Stern Center for Business and Human Rights, March 2017) . However, the discussion here highlights those frameworks that specifically reflect the process of due diligence outlined in the Guiding Principles. 36 Since its inception in 1997, the GRI has developed numerous iterations of its standards. The GRI Standards (GRI Standards) were released on 19 October 2016 and are effective from July 2018, replacing the previous G4 Sustainability Reporting Guidelines (G4 Guidelines) , which were the first version of the GRI standards to incorporate the concept of due diligence. The most significant difference between the GRI Standards and the G4 Guidelines is in respect of format; the substance of the two standards remains largely the same: Global Reporting Initiative, ‘Shining a Light on Human Rights: Corporate Human Rights Performance Disclosure in the Mining, Energy and Financial Sectors’ (6 December 2016) (GRI 2016) at 7. Note the G4 Guidelines are divided into three documents: Reporting Principles and Standard Disclosures; Implementation Manual; FAQs. Unless otherwise stated, references to clauses in the G4 Guidelines are references to the Reporting Principles and Standard Disclosures document. The GRI Standards are divided into multiple documents, which are cited separately below, as relevant. 37 Shift and Mazars, ‘UN Guiding Principles Reporting Framework with Implementation Guidance’ (2015) (UNGPRF). 38 Another notable framework is Danish Institute for Human Rights, ‘Human Rights Impact Assessment Guidance and Toolbox’ . 33

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Human rights due diligence and the (over) reliance on social auditing  115 practices – based on publicly available information.39 While not a reporting guideline per se, its indicators act as a proxy for good due diligence practice.40 The GRI promotes the most widely adopted global sustainability reporting framework.41 The latest version, the GRI Standards, incorporates the Guiding Principles concept of due diligence;42 compliant companies,43 here, are required to identify and report on their material human rights impacts and their management.44 Relevantly, the GRI Standards specifically contemplate supplier assessments where a company has identified material supply chain risks.45 In such cases, companies must report on their ‘management approach’, including for example policies, commitments, targets and resources allocated to managing the human rights impact of their supply chains.46 Notably, the GRI Standards suggest, but do not require, that companies disclose the specific processes used to assess supply chain impacts,47 thus arguably 39 Corporate Human Rights Benchmark (CHRB). See also ‘Corporate Human Rights Benchmark Pilot Methodology 2016’ which sets out the indicators underlying the CHRB. The CHRB is coordinated by the Business & Human Rights Resource Centre, with funding from the UK government. 40 Notably, this is one of many human rights indicators. It is highlighted here due to its comprehensive nature. Other well-known indicators – for example, KnowTheChain, Oxfam’s Behind the Brands campaign, Access to Medicine Index and Ranking Digital Rights – tend to be limited to discrete human rights issues. 41 For example, KPMG notes that the GRI promotes the most popular voluntary reporting guidelines, estimating that 93 per cent of the world’s largest 250 corporations report on their sustainability performance and 82 per cent of these rely on the GRI: KPMG, ‘Currents of Change: The KPMG Survey of Corporate Responsibility Reporting 2015’ (2015). Further, as at 7 May 2017 there were 26,669 GRI reports in the GRI Database, and in the year 2016, at least 2,944 organisations reported in accordance with the G4 Guidelines: < http://​database​.globalreporting​.org/​>. 42 The G4 Guidelines were the first iteration to adopt the UNGPs. See GRI, ‘Linking G4 and the UN Guiding Principles’ (16 November 2015) . 43 Companies claiming that they have reported in accordance with the G4 Guidelines must meet minimum reporting requirements. They may choose between ‘core’ and ‘comprehensive’ reporting options. 44 Specifically, companies must identify their material social impacts, which include human rights impacts. These are defined in the GRI Standards as a ‘topic that reflects a reporting organization’s significant economic, environmental and social impacts; or that substantively influences the assessments and decisions of stakeholders’: GRI Standards Glossary . See also G4 Guidelines, ‘Reporting Principles and Standard Disclosures’, clause 5.2; GRI Standard 101: Foundation 2016, clause 1.3. Consistent with the UNGPs, impacts include those directly linked to a company’s activities, products, or services by its relationship with a supplier: GRI Standard 101: Foundation 2016, clauses 1.4, 2.4. See also G4 Guidelines, Aspect: Assessment, G4-HR9 and GRI Standard 412: Human Rights Assessment 2016 which deal specifically with human rights impact assessments. 45 G4 Guidelines, Aspect: Supplier Human Rights Assessment G4-HR10, G4-HR11; GRI Standard 414: Supplier Social Assessment 2016. In addition to the specific guidance on supplier social assessments, a number of the other human rights ‘modules’ – including freedom of association and collective bargaining, child labour, forced labour – provide that companies must report on measures taken to prevent suppliers from violating these rights. 46 G4 Guidelines, Disclosures on Management Approach, G4-DMA; GRI Standard 103: Management Approach 2016, Disclosure 103-2. Companies must report on their ‘management approach’ to all impacts that have been identified as material. 47 GRI Standard 414: Supplier Social Assessment 2016; G4 Guidelines, Implementation Manual, 192–93.

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116  Research handbook on human rights and business falling short of the reporting requirement set out in principle 21 of the Guiding Principles. Companies must also report on specific indicators, such as how many new and existing suppliers are screened or assessed for social impacts.48 The GRI Standards also incorporate the Guiding Principles concept of tracking by directing companies to explain how they evaluate the effectiveness of their management approach in respect of all material impacts (including supply chains) and the results of such evaluation.49 The more recent UNGPRF, launched in 2015, provides companies with even more specific guidance on how to report on human rights impacts in accordance with the Guiding Principles, including due diligence reporting. Divided into three major sections – human rights governance, defining salient human rights issues and managing salient human rights issues – the UNGPRF sets out a series of questions for companies to address.50 Of specific relevance to due diligence, it provides that companies must identify their salient human rights issues (that is, those with the most severe potential human rights impacts).51 Companies should then show how they are managing these issues, including by engaging with stakeholders, integrating human rights findings into company decisionmaking processes and actions and identifying changes in salient human rights issues over time.52 Finally, companies should report on how they track the effectiveness of their actions, principally through concrete examples and data. Notably, the UNGPRF acknowledges the difficulty of demonstrating direct causation between a company’s efforts and the mitigation or prevention of human rights impacts. Thus, it is considered sufficient to establish evidence of a reduction in the frequency or severity of impact, which can reasonably be correlated to the company’s efforts to achieve that outcome.53 Initial evidence emerging from these initiatives however suggests that a majority of companies are not currently reporting adequately on their due diligence practices, both in respect of their supply chains and more generally. For example, a recent review by GRI of the sustainability reports of companies in the mining, energy and financial services sectors found that only 26 per cent of companies reported on human rights reviews or impact assessments. Further, while a majority identified supply chain risk as a material topic, less than 30 per cent of companies actually reported on the human rights impacts of their supply chains.54 Those who did report on supplier risk tended to report on policies and procedures in a general manner, without reporting on the real or potential impacts of their supply chains, how such impacts were dealt with or the extent of supplier screenings.55 This led to the conclusion that ‘addressing impacts in the supply chain is not yet a mainstream activity in the vast majority of companies’.56 GRI Standard 414: Supplier Social Assessment 2016; G4 Guidelines, Aspect: Supplier Human Rights Assessment G4-HR10, G4-HR11. 49 GRI Standard 103: Management Approach 2016, Disclosure 103-3; G4 Guidelines, G4-DMA. 50 It sets out both overarching, and more detailed questions. Compliant companies are expected, at a minimum, to respond to the overarching questions, and work towards answering the more detailed questions. 51 UNGPRF (n 37) Part B, 47–54. 52 UNGPRF (n 37) Part C, 55–99. Notably, the UNGPRF also discusses the importance of remediation processes, 86–99. 53 UNGPRF (n 37) Part C, 81–85. 54 GRI 2016 (n 36) 8. These figures are based on the quantitative analysis of the sustainability reports of 464 companies, prepared in accordance with the G4 Guidelines and published in 2015. 55 GRI 2016 (n 36) 9, 21–22. This assessment is based on a qualitative review of a sample of 30 reports of the total 464 reports reviewed. 56 GRI 2016 (n 36) 22. 48

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Human rights due diligence and the (over) reliance on social auditing  117 The UNGPRF database, which by early 2019 had assessed the reporting practices of 124 companies against the Framework,57 presents a similar picture.58 Initial aggregate data analysis by UNGPRF indicates a lack of meaningful information. For example, only 8 per cent of companies have explicitly reported on the first fundamental stage of due diligence – namely, identifying salient human rights impacts – with 56 per cent of companies providing no explanation at all. Further, while 86 per cent of companies reported at least one action or process taken in response to human rights risks at least at a high level, only 20 per cent provided insightful examples, and only 8 per cent provided detailed information including how and why certain actions were taken. Tracking effectiveness was the weakest aspect of reporting, with 45 per cent of companies providing no or limited information, and only 11 per cent of companies providing concrete data and clear explanations about their tracking processes.59 Similarly, the CHRB also reports low levels of due diligence practice and reporting. Its 2017 report tracking the performance of 98 publicly traded companies in the agricultural products, apparel and extractives sectors found that only one third of companies had attempted to identify their human rights risks, 20 per cent had integrated and acted on those risks, 18 per cent had tracked the effectiveness of those risks and only 2 per cent of companies had publicly communicated their effectiveness.60 Further, the CHRB found that while many companies have specific policies or guidelines in place in respect of key human rights risks in supply chains, only two companies had provided a public analysis of progress in addressing those rights.61 It concluded that ‘only a small cluster of leaders seem, therefore, to have a human rights due diligence system continually preventing and mitigating their human rights risks’.62 While the latest 2018 report noted some improvements, significantly, 41 companies out of 101 still scored zero in respect of the CHRB’s human rights due diligence indicators.63 These initial results indicate that more than seven years since the adoption of the Guiding Principles, a majority of companies are not adequately reporting on their human rights due diligence practices, including in respect of supply chains. While a lack of clear reporting does not necessarily mean that companies are not undertaking human rights due diligence, it arguably suggests so. A survey conducted by Norton Rose and the British Institute of International and 57 The UNGPRF has selected companies from the following sectors: apparel and footwear; banking and financial services; food and beverage; ICT; oil equipment and services; oil, gas and extractives; palm oil; and tobacco. This was the size of the database, as at 29 January 2019. 58 It should be noted that to date, only six ‘early adopter’ companies have published reports using the Framework and a handful of other companies have indicated that they are using the UNGPRF, either as an internal management tool or to improve their external reporting, or both: . Thus the database assesses companies who are not necessarily claiming to be reporting in accordance with the Framework. 59 Shift, ‘Human Rights Reporting: Are companies telling investors what they need to know?’ (May 2017) . 60 Corporate Human Rights Benchmark, ‘Key Findings 2017’ (March 2017) (CHRB 2017). The report tracks performance by granting companies scores in respect of specific indicators. Companies are chosen on the basis of size, revenues, geographic and industry balance. The CHRB has a long-term goal of eventually assessing the top 500 global companies: . 61 Inditex had done so in respect of a living wage and Adidas in respect of freedom of association. 62 CHRB 2017 (n 60) 27. 63 Corporate Human Rights Benchmark, ‘2018 Key Findings, Apparel, Agricultural Products and Extractives Companies’ (November 2017) 30.

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118  Research handbook on human rights and business Comparative Law (BIICL)64 which found that more than 50 per cent of companies surveyed had never undertaken a specific human rights due diligence process provides some support for this assumption.65 Rather, evidence indicates that at present companies are relying principally on social auditing to regulate the human rights impacts of their supply chains.

3.

THE RESILIENCE OF SOCIAL AUDITING

Social auditing is a process by which a company verifies supplier compliance with human rights standards, typically set out in a code of conduct. While the precise nature of a social audit will vary depending on the industry in question and the organization undertaking the audit, it generally involves a physical inspection of a facility (for example a factory, farm, mine or vessel), combined with a review of documents (to the extent that records are kept) and interviews with management and employees.66 Social auditing is contemplated by the Guiding Principles, as well as by associated guidelines and frameworks, yet it is ascribed a reasonably limited role. The Guiding Principles refer to social auditing solely in the context of tracking, noting that it may be one of an array of tools used to assess the effectiveness of a company’s response to its human rights impacts.67 The various OECD guidelines, in addition to tracking, also refer to auditing in the context of identifying human rights impacts68 – although in contrast to the typical social audit format (discussed further below), the OECD highlights the need for significant worker involvement as well as consultation with a broad base of stakeholders including government authorities,

The survey covered 152 companies from a range of sectors: R McCorquodale, L Smit, S Neely and R Brooks, ‘Human Rights Due Diligence in Law and Practice: Good Practices and Challenges for Business Enterprises’ [2017] 2 Business and Human Rights Journal 194 (Norton Rose/BIICL Study). 65 Although note some of these companies had undertaken some kind of incidental human rights assessment. This lack of implementation may also be attributed in part to the non-binding nature of due diligence requirements at both the international and domestic level. For example, see: Human Rights Watch, ‘Human Rights in Supply Chains: A Call for a Binding Global Standard on Due Diligence’ (30 May 2016) . The ILO, at its 105th session of the International Labor Conference (2016), adopted a ‘Resolution concerning decent work in global supply chains’ (19 June 2016), which concluded (at para. 16(f)) that governments should ‘stimulate transparency and encourage, and, where appropriate, require, by various means, that enterprises report on due diligence within their supply chains to communicate how they address their human rights impacts’ . 66 See for example, ISEAL Alliance, ‘Assuring Compliance with Social and Environmental Standards: Code of Good Practice’ (v1.0, October 2012) 5 (ISEAL Alliance Code of Good Practice). The ISEAL Alliance is a multi-stakeholder initiative whose aim is to strengthen the sustainability standards of MSIs (and other standard setting and accreditation bodies). 67 Other tools contemplated include performance contracts and reviews, surveys and grievance mechanisms: Guiding Principles (n 4), Principle 20, Commentary. 68 See OECD Apparel Guidance and OECD Agriculture Guidance (n 10). Notably, in the context of impact assessment, these guides do not refer directly to social auditing but rather to monitoring and site level assessments, which are in effect a type of social audit. See also OECD General Guidance (n 15) 27–28, 32. 64

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Human rights due diligence and the (over) reliance on social auditing  119 trade unions, civil society and affected communities.69 Similarly, the GRI Standards and UNGPRF also refer to auditing as a tool for assessing human rights impact and tracking effectiveness. However, they cite it as only one of many potential methods. For example, other assessment and tracking mechanisms include contractual reviews, external performance ratings and benchmarks, engaging with relevant stakeholders, responding to political developments, analysing data from industry and government and implementing effective grievance mechanisms.70 Significantly, none of these reporting frameworks consider social auditing to be an appropriate means of responding to human rights impacts, and in the context of impact assessment and tracking, social auditing is seen as only one of many possible tools. Thus, while social auditing is no doubt a component of due diligence, it is by no means its focal point.71 Yet there is a concern that companies, rather than undertaking comprehensive due diligence, are continuing to rely principally on social auditing to address the human rights impacts of their supply chains.72 According to some estimates, social auditing accounts for up to 80 per cent of ethical sourcing budgets, and amounts to an estimated US$50 billion industry.73 It is also the most common tool utilised by multi-stakeholder and corporate-led initiatives set up to address the human rights impacts of global supply chains. For example, major initiatives such as Social Accountability International, the Fair Labor Association (FLA), Worldwide Responsible Accredited Production (WRAP), Fair Wear Foundation, Business Social Compliance Initiative (BSCI), Electronic Industry Citizenship Coalition and Ethical Trading Initiative (ETI) – each of which promulgate a standard of conduct – rely on social auditing as the primary means of enforcing their standard.74 Further, the ISEAL Alliance, a MSI whose aim is to strengthen the sustainability standards of standard-setting bodies, assumes the primacy of auditing as a compliance tool.75 In recognition of the growing costs and complexity associated with extensive social auditing, a number of platforms – such as SEDEX, Fair Factories Clearinghouse and the Responsible Sport Initiative – now facilitate audit sharing among companies.76

69 OECD Apparel Guidance (n 10) 51–52, 82–83; OECD Agriculture Guidance (n 10) 34, 37–38; OECD General Guidance (n 15) 26–27, 48–54. 70 GRI Standard 414: Supplier Social Assessment 2016; G4 Guidelines, Implementation Manual, 192; GRI Standard 103: Management Approach 2016, Disclosure 103-3; G4 Guidelines, Implementation Manual, 65; UNGPRF (n 37), 66–71, 81–85. 71 Although noting that it appears to be given more prominence in the mining sector as per the OECD Mining Guidance (n 10). 72 See for example, IOD Parc, ‘Ethical Trading Initiative, External Evaluation Report’ (2015) . 73 ETI, ‘Auditing Working Conditions’ (ETI Auditing Working Conditions); see also UK Joint Committee Report (n 27) 46–48, which received evidence indicating that companies tended to rely on social audits. 74 Although the ETI does not itself conduct audits, its members have typically relied on auditing to implement the ETI code throughout their supply chains. It should however be noted that the ETI acknowledges the limits of social auditing and is currently attempting to move away from the social audit model: ETI, ‘ETI Perspective 2020: A Five Year Strategy’ (7 December 2015) . 75 ISEAL Alliance Code of Good Practice. 76 See ; ; https://​www​.sedexglobal​ .com/​about​-us/​.

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120  Research handbook on human rights and business Initial empirical studies provide further support for the dominance of social auditing. For example, our own review of select companies from the UNGPRF database reveals that more than half relied on social audits when conducting human rights assessments,77 while about 36 per cent relied on additional mechanisms such as supplier self-assessment, third party research and grievance mechanisms. Further, 70 per cent cited codes of conduct and social auditing as their response to human rights impacts; 55 per cent also relied on training and best practice sessions; 22 per cent on contract terms; and only a handful used additional techniques such as engaging with MSIs, undertaking discrete projects and engaging with unions, NGOs and governments. Approximately 67 per cent relied on social auditing to track effectiveness. Similarly, the Norton Rose/BIICL Study found that audits were one of the most commonly used methods for identifying human rights impacts (although acknowledging that companies were also utilizing other techniques, such as desktop research and studies, independent expert reports and stakeholder and supplier consultations). Even more significantly, it found that when it came to appropriate action, contractual provisions and codes of conduct were the most common responses to human rights impacts.78 While the survey did not specifically refer to auditing, generally codes of conduct (and to a lesser extent contractual provisions) rely on auditing as an enforcement measure. The ongoing reliance on social auditing reflects a very limited vision of supply chain human rights due diligence. It is also becoming increasingly problematic, as there is now a growing body of evidence indicating that social auditing is, in and of itself, an ineffective tool for achieving meaningful and consistent human rights improvements.

4.

THE FAILURE OF SOCIAL AUDITING

The failure of social auditing is perhaps most tragically exemplified by a number of high profile disasters and scandals in recent years. In the apparel sector, the collapse of the Rana Plaza building and the fires at Tazreen and Ali Enterprises were preceded by numerous social audits. At least two of the factories in the Rana Plaza complex had passed social audits by BSCI just months before its collapse.79 The Tazreen factory had been audited multiple times

Analysis was undertaken on the database as at 7 May 2017. Companies were selected from sectors where supply chain issues are most directly relevant to a company’s operations, namely: all companies from the apparel and footwear, food and beverage, palm oil and tobacco sectors, and four manufacturing companies from the ICT sector (36 companies in total). Banking and financial services, oil, gas and extractives companies and service providers from the ICT sector were excluded. The UNGPRF database records a company’s disclosures (or lack thereof) against each section (and its component questions) of the UNGPRF. Our review was undertaken by generating and analysing database reports for each of the 36 companies in respect of the following three sections of the UNGPRF: C3 (Assessing Impacts) C4 (Integrating Findings and Taking Action), C5 (Tracking Performance). This analysis is intended as a high-level guide only, and more detailed future analysis may be required. 78 Norton Rose/BIICL Study (n 64) 208–09, 215. 79 Juliane Reinecke and Jimmy Donaghey, ‘The “Accord for Fire and Building Safety in Bangladesh” in Response to the Rana Plaza Disaster’ in Axel Marx et al (eds), Global Governance of Labour Rights: Assessing the Effectiveness of Transnational Public and Private Policy Initiatives (Edward Elgar Publishing 2015) (Marx et al). For further discussion on these issues, see Chapter 7. 77

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Human rights due diligence and the (over) reliance on social auditing  121 by Wal-Mart and while safety issues had been raised, no remedial action was ever taken.80 The Ali Enterprises factory had been certified against SAI’s code of conduct and also separately audited by an auditor accredited by both WRAP and the FLA.81 In the seafood industry, a series of media reports in 2015 exposed forced labour and human trafficking in the seafood supply chain of major companies such as Nestle, Procter & Gamble (Mars), Wal-Mart and Costco.82 It emerged that these companies and their first tier suppliers (predominantly major Thai companies) had relied predominantly on codes of conduct and social auditing to identify human rights risks.83 These tragic examples are merely illustrative of a growing consensus that social auditing is in and of itself a very limited tool, capable of delivering only superficial and short-term outcomes at best, and wholly inadequate for detecting and addressing more serious and systemic human rights violations. In particular, inherent limitations in the manner in which social auditing is conducted, as well as broader structural impediments, raise serious questions about its suitability for assessing, responding to and tracking human rights impacts.

5.

ASSESSING AND TRACKING: THE INHERENT LIMITATIONS OF SOCIAL AUDITING

If, as most due diligence frameworks contemplate, social auditing is used to assess human rights impacts or track effectiveness, it must at a minimum be capable of adequately identifying human rights violations. Yet inherent limitations in the manner in which social auditing is conducted raise questions about its ability to perform even this basic diagnostic function.84 First, the audit format itself is inherently superficial. Social audits tend to be undertaken as a short checklist exercise, generally over the course of a few days at intervals of one to two years. Underlying issues and causes are often ignored, with results, at best, only reflecting

WRC, ‘Memo re Saturday’s Devastating Factory Fire in Bangladesh and the Urgent Need for Reform’ (30 November 2012) ; BTC Trade for Development, ‘Made in Misery: Ethics in the Garment Industry after Rana Plaza’ (2014) . 81 Ceren Pekdemir et al, ‘On the Transformative Capacity of Private Fair Labour Arrangements’ in Marx et al (n 79). 82 See . Nestlé subsequently commissioned a report to investigate the extent of forced labour in its supply chain: Verité, ‘Recruitment Practices and Migrant Labor Conditions in Nestlé’s Thai Shrimp Supply Chain’ (2015) . 83 Martha Mendoza, ‘AP Report on Slave-peeled Shrimp Spurs Calls for Boycott’ AP (14 December 2015) ; Erik Larson, ‘These Lawyers Want Slave Labor Warning on Your Cat Food’ Bloomberg (11 December 2015) accessed 20 May 2017; Costco Disclosure Regarding Human Trafficking and Anti-Slavery ; Genevieve LeBaron and Jane Lister ‘Benchmarking Global Supply Chains: The Power of the “Ethical Audit” Regime’ (2015) 41 Review of International Studies 905. 84 The following discussion generally applies to auditing by both individual companies and MSIs and corporate-led initiatives. However, it should be noted that some of the multistakeholder initiatives have attempted to address at least some of these inherent limitations. 80

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122  Research handbook on human rights and business a snapshot in time.85 Instances of supplier fraud and evasion – for example, falsifying workers’ records and ‘cleaning up’ facilities prior to inspections – are well documented.86 Meanwhile workers and other relevant stakeholders who might counteract these issues and shed light on violations – such as NGOs and trade unions – tend not to be meaningfully involved in the process at all.87 Critics have also pointed to concerns about independence, transparency and accountability. For example, the fact that auditors may be paid (either by buyer brands or supplier factories), combined with their often limited experience in human rights and labour issues, raises questions about the quality, independence and veracity of social audits.88

85 Richard M Locke, The Promise and Limits of Private Power: Promoting Labor Standards in a Global Economy (Cambridge University Press 2013) (Locke 2013) 35–37; Richard Locke, Matthew Amengual, Akshay Mangla, ‘Virtue out of Necessity? Compliance, Commitment, and the Improvement of Labor Conditions in Global Supply Chains’ (2009) 37(3) Politics & Society 319, 331–34 (Locke et al 2009); Dara O’Rourke, ‘Multi-stakeholder Regulation: Privatizing or Socializing Global Labor Standards?’ (2006) 34(5) World Development 899 (O’Rourke 2006) 907; Clean Clothes Campaign, ‘Looking for a Quick Fix: How Weak Social Auditing Is Keeping Workers in Sweatshops’ (2005) (Clean Clothes Campaign 2005) 26–28, 32–39; Genevieve LeBaron and Jane Lister, ‘SPERI Global Political Economy Brief No. 1: Ethical Audits and the Supply Chains of Global Corporations’ (Sheffield Political Economy Research Institute, University of Sheffield 2016) (LeBaron & Lister 2016); ETI Auditing Working Conditions (n 73); ILO, ‘Fishers First: Good Practices to End Labour Exploitation at Sea’ (2016) (ILO Fishers First) 45. 86 Clean Clothes Campaign 2005 (n 85) 20–25; Clean Clothes Campaign, ‘Cashing In: Giant Retailers, Purchasing Practices, and Working Conditions in the Garment Industry’ (2009) (Clean Clothes Campaign 2009) 46, 51; Human Rights Watch, ‘Whoever Raises their Head Suffers the Most”: Workers’ Rights in Bangladesh’s Garment Factories’ (22 April 2015) (HRW Bangladesh); Sarah Labowitz, Dorothée Baumann-Pauly, ‘Business as Usual Is Not an Option: Supply Chains and Sourcing after Rana Plaza’ (NYU Stern Center for Business and Human Rights, April 2014) (NYU Report) 18; Locke et al 2009 (n 85) 332; ETI Auditing Working Conditions (n 73). 87 Locke et al 2009 (n 85) 331–34; O’Rourke 2006 (n 85) 908; Clean Clothes Campaign 2005 (n 85) 41–48; Peter Utting, ‘Multistakeholder Regulation of Business: Assessing the Pros and Cons’ in Rob Van Tulder, Alain Verbeke and Roger Strange (eds), International Business and Sustainable Development, vol 8 (Emerald Group Publishing Limited 2014) 437; Stephanie Barrientos and Sally Smith ‘The ETI Code of Labour Practice: Do Workers Really Benefit? Reporting on the ETI Impact Assessment 2006, Part 1: Main Findings’ (Institute of Development Studies, University of Sussex 2006) (Barrientos & Smith 2006) 40; Stephanie Barrientos and Sally Smith, ‘Do Workers Benefit from Ethical Trade? Assessing Codes of Labour Practice in Global Production Systems’ (2007) 28(4) Third World Quarterly 713 (Barrientos & Smith 2007) 726. 88 Dara O’Rourke, ‘Outsourcing Regulation: Analyzing Nongovernmental Systems of Labor Standards and Monitoring’ (2003) 31(1) Policy Studies Journal 1; Locke et al 2009 (n 85) 333–34; Clean Clothes Campaign 2005 (n 85) 54–62; Utting 2014 (n 87) 437; American Federation of Labor-Congress of Industrial Organizations, ‘Responsibility Outsourced: Social Audits, Workplace Certification and Twenty Years of Failure to Protect Worker Rights’ (2013) (AFL-CIO Report) 25–26. It should be noted that some MSIs have attempted to address these issues. For example, in relation to funding, the FLA and FWF pay auditors from a pool of funds

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Human rights due diligence and the (over) reliance on social auditing  123 It is also argued that social auditing is more suited to identifying violations of certain basic working conditions, such as health and safety, wages, working hours and leave entitlements (also termed ‘outcome rights’),89 whereas broader systemic rights such as freedom of association, the right to join trade unions, the right to collective bargaining and non-discrimination are complex, ‘less visible [and] more deeply embedded’ rights, which are not readily identified by an overly technical checklist audit approach.90 These issues require more meaningful engagement with workers in order to be detected. Finally, companies typically only conduct audits of their first-tier suppliers (that is, those with whom they have a direct contractual relationship). Yet the very essence of global supply chains is the division of production into multiple stages. Focusing social audits solely on tier one suppliers simply shifts problems further down the supply chain, where they remain undetected.91 These limitations raise real questions about the ability of the audit to present a comprehensive picture of the extent of human rights violations within global supply chains. For this reason, it is critical that companies utilise additional diagnostic tools in tandem with the social audit.

6.

APPROPRIATE ACTION: BROADER STRUCTURAL LIMITATIONS

While neither the Guiding Principles nor associated frameworks contemplate social auditing as an appropriate response to human rights impacts, some companies are nonetheless relying on it as a solution to human rights violations. Yet broader structural limitations render it a limited tool for achieving meaningful and consistent improvements. A significant body of research, undertaken principally by Locke and his colleagues, provides a growing empirical basis for the assertion that social auditing is routinely failing workers. For example, a study analysing more than 800 audits of Nike’s suppliers in 51 different countries found mixed compliance results.92 Some factories were substantially compliant, while others exhibited persistent violations of wages, overtime and health and safety.93 The

that is contributed to by member companies, thus decreasing the potential for a direct conflict of interest. Further, the FLA has attempted to address transparency concerns by publishing the results of its audits. 89 Barrientos & Smith 2006 (n 87); Barrientos & Smith 2007 (n 87); Locke et al 2009 (n 85) 331–34. 90 Barrientos & Smith 2007 (n 87) 725. See also Clean Clothes Campaign 2005 (n 85) 29, 33–37; Locke et al 2009 (n 85) 331–34; Mark Anner in ‘Labor History Symposium: Gay W. Seidman, Beyond the Boycott’ Labor History (2008) 49(3) 341–46 (Anner 2008); AFL-CIO Report (n 88). 91 LeBaron and Lister 2016 (n 85); ILO Fishers First (n 85); see also for example Costco Disclosure Regarding Human Trafficking and Anti-Slavery which notes that ‘sub-suppliers generally are not within the scope of the audit’. 92 RM Locke, F Qin and A Brause, ‘Does Monitoring Improve Labor Standards? Lessons from Nike’ (2007) 61(1) Industrial and Labor Relations Review 1 (Locke et al 2007). See also Locke 2013 (n 85) chapter 3 (this chapter is based on the 2007 study). 93 The authors noted that variations in working conditions were largely the result of country effects (that is, the level of labour law enforcement), factory characteristics and the nature of the relationship between Nike and the supplier (in particular, frequency of visits, where the length of the relationship and the existence of other customers): Locke et al 2007 (n 92) 20.

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124  Research handbook on human rights and business authors concluded that despite significant and consistent efforts on Nike’s part in improving working conditions of its suppliers, monitoring alone was ‘not producing the large and sustained improvements in workplace conditions that many had hoped it would’.94 A separate study of the audit reports of another prominent apparel brand came to a similar conclusion.95 The study found consistent violations of the code’s provisions on health and safety, overtime and work hours and freedom of association. Only 24 per cent of factories were in full compliance; 53 per cent were explicitly not approved (although still producing for the brand) and 22 per cent required some kind of followup. The study concluded that these ongoing violations were not for want of effort, but rather a result of ‘structural deficiencies inherent in the traditional compliance model’.96 Separately, an independent review of the ETI (one of the major MSIs mentioned above), found that social auditing had led to some improvements in ‘outcome rights’ such as health and safety and working hours.97 However, even here improvements were patchy and inconsistent, while human rights groups continue to expose major violations.98 Further, in relation to wages, while social auditing may have contributed to some limited improvements, such advances have been only towards a minimum, rather than living, wage. When it came to broader systemic rights such as freedom of association, the right to join trade unions, the right to collective bargaining and non-discrimination, the review found that social auditing has had barely any impact at all.99 Thus, while social auditing may result in some improvements in basic working conditions, these are neither widespread nor sustainable.100 When it comes to broader systemic rights, there has been virtually no meaningful change at all. As increasingly highlighted by researchers, activists and international frameworks, this is largely because factory conditions do not arise in a vacuum, and broader structural limitations also need to be addressed. This requires turning attention to buyer conduct and its impact on the ability of suppliers to meet human

Locke et al 2007 (n 92) 21. Locke et al 2009 (n 85). 96 Locke et al 2009 (n 85) 331. See also a study in respect of the limits of auditing in the electronics sector: Greg Distelhorst, Richard M Locke, Timea Pal and Hiram Samel, ‘Production Goes Global, Compliance Stays Local: Private Regulation in the Global Electronics Industry’ (2015) 9(3) Regulation and Governance 224 (Distelhorst et al). 97 Barrientos & Smith 2006 (n 87); see also Barrientos & Smith 2007 (n 87). The Clean Clothes Campaign has also acknowledged limited improvements in these areas: Clean Clothes Campaign 2005 (n 85) 29, 32–33. 98 Human Rights Watch, ‘“Work Faster or Get Out”: Labor Rights Abuses in Cambodia’s Garment Industry’ (March 2015) (HRW Cambodia); HRW Bangladesh (n 86); Oxfam, ‘Trading Away Our Rights: Women Working in Global Supply Chains’ (2004) (Oxfam 2004). 99 Other organisations and researchers have come to similar conclusions. See for example, Clean Clothes Campaign 2005 (n 85) 33–40; HRW Bangladesh (n 86); Locke et al 2009 (n 85) 334; David Vogel, ‘Private Global Business Regulation’ (2008) 11(1) Annual Review of Political Science 261 (Vogel 2008) 274; Mark Anner ‘Corporate Social Responsibility and Freedom of Association Rights: The Precarious Quest for Legitimacy and Control in Global Supply Chains’ (2008) 40(4) Politics & Society 609. The only broader systemic rights which researchers agree have experienced some improvement are child and forced labour, although this cannot be solely attributed to social auditing: Barrientos & Smith 2007 (n 87) 723. Clean Clothes Campaign 2005 (n 85) 29; AFL-CIO Report (n 88) 27–28. 100 See also Vogel 2008 (n 99) 273–75, citing other studies which suggest mixed results. 94 95

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Human rights due diligence and the (over) reliance on social auditing  125 rights standards. Two issues of particular relevance in the context of due diligence – commitment and purchasing practices – are discussed further below. 6.1

Power, Commitment and Leverage

Underlying the social audit model is the assumption that buyers have sufficient leverage to compel suppliers to comply with codes of conduct and improve working conditions, and further, that they will exercise this leverage.101 This assumption is based on power relations between buyers (also referred to as ‘lead firms’ or ‘brands’) and suppliers. Buyers will typically perform the most valuable activities (such as product development, design, innovation, branding and marketing), dictate the terms of production and retain a majority of the profits. Suppliers, typically located in developing economies, comply with the buyer’s product specifications and standards and perform the labour intensive, low value functions within the chain.102 Thus buyers have the power to impose commercial terms on suppliers. The social audit model assumes that in such circumstances, buyers also have sufficient leverage to enforce compliance with human rights standards.103 Yet power relations are subtler in practice than theory suggests, and the broader nature of the relationship must also be taken into account. A company is most likely to be able to exercise leverage when it commits to suppliers, for example by constituting a large proportion of output, placing regular orders or maintaining a long-term relationship.104 However, this is often not the case. For example, in the apparel sector, suppliers typically manufacture for a multitude of buyers, with even large brands sometimes only constituting a small proportion of a supplier’s total production.105 Further, contracts are usually short-term, with buyers switching between producers based on price and quality, rather than social compliance.106 Conversely, buyers rarely switch suppliers on the basis of non-compliance with codes of

Locke et al 2009 (n 85) 323. These power dynamics are discussed extensively by supply chain theorists. See for example, Gary Gereffi, ‘The Organization of Buyer-Driven Global Commodity Chains: How U.S. Retailers Shape Overseas Production Networks’ in Gary Gereffi and Miguel Korzeniewicz (eds), Commodity Chains and Global Capitalism (Praeger 1994); Gary Gereffi et al, ‘The Governance of Global Value Chains’ (2005) 12(1) Review of International Political Economy 78; Gary Gereffi, ‘The New Offshoring of Jobs and Global Development’ (ILO Social Policy Lectures, Jamaica, December 2005) 11–14, 46–47; Karina Fernandez-Stark, Stacey Frederick and Gary Gereffi, ‘The Apparel Global Value Chain: Economic Upgrading and Workforce Development’ (Center on Globalization, Governance and Competitiveness, Duke University, November 2011) 7, 11–12. See also Daniel Berliner, Anne Regan Greenleaf, Milli Lake, Margaret Levi and Jennifer Noveck, Labor Standards in International Supply Chains: Aligning Rights and Incentives (Edward Elgar 2015); Richard Appelbaum and Nelson Lichtenstein, ‘A New World of Retail Supremacy: Supply Chains and Workers’ Chains in the Age of Wal-Mart’ (2007) 70 International Labor and Working-Class History (Appelbaum & Lichtenstein) 106–07. 103 Locke et al 2009 (n 85) 323; Distelhorst et al (n 96) 232–33. 104 Barrientos & Smith 2006 (n 87) 35. 105 Jill Esbenshade, ‘A Review of Private Regulation: Codes and Monitoring in the Apparel Industry’ (2012) 6(7) Sociology Compass 541 (Esbenshade 2012) 542–43. 106 Oxfam 2004 (n 98) 37–38, 54; Mark Anner, Jennifer Bair and Jeremy Blasi, ‘Toward Joint Liability In Global Supply Chains: Addressing The Root Causes Of Labor Violations In International Subcontracting Networks’ (2013) 35 Competition Labour Law & Policy Journal (Anner et al 2013), 13–14. 101 102

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126  Research handbook on human rights and business conduct.107 That is, sourcing decisions remain predominantly motivated by commercial terms – quality, speed of delivery and price.108 Social compliance remains an afterthought for most companies, something that is considered subsequent to entering into a contract with a supplier, rather than a critical component of whether to do so in the first place, or whether to maintain a commercial relationship. These factors give buyers less leverage than theory would suggest in influencing a supplier’s human rights compliance.109 The concept of leverage is an important component of a company’s response to human rights impacts, with the Guiding Principles providing that companies should utilise and, where possible, increase leverage to prevent or mitigate human rights impacts. Yet the Guiding Principles also acknowledge the potential complexities in doing so where the harm in question is directly linked to a company’s operations but where the company has not itself contributed to harm (as is often the case within supply chains).110 The OECD also acknowledges the complexities of exercising leverage over suppliers,111 and seeks to provide concrete guidance to companies on how it may be increased, in its sector-specific and general due diligence guides. Suggested measures include preassessing suppliers prior to the placement of orders, longer-term contracts, consolidating suppliers, rewarding compliant companies with increased orders, capacity building, training, and pooling leverage with other buyers by acting collectively in respect of common suppliers112 – the latter may be undertaken through, for example, joining a MSI or collaborating with industry peers.113 Essentially, the OECD recommends measures to counteract the obstacles to leverage outlined above. Further, while recognizing the difficulty in identifying, assessing and exercising leverage over suppliers beyond the first tier, the OECD indicates that ‘[t]his does not diminish the enterprise’s responsibility to identify harmful impacts upstream’.114 In response, companies are advised to establish traceability systems and to ensure that companies at ‘chokepoints’115 are conducting their own due diligence upstream, noting that there are advantages to undertaking these activities collectively.116 Similarly, in the context of violations in the seafood sector, the ILO has advocated for partnerships with other buyers, international organizations, NGOs and

Locke et al 2009 (n 85) 334–36. Although increasingly research suggests that rather than pulling out of a factory, it is preferable for buyers to stay on and attempt to work through remediation together. 108 Oxfam 2004 (n 98) 32–38; Locke et al 2009 (n 85) 334–36; Anner et al 2013 (n 106) 8–14; ETI, ‘Integrating Ethical Trade Principles into Core Business Practices: An Introductory Toolkit’ (2016)

(ETI Integrating Ethical Trade) 13. 109 Locke et al 2009 (n 85) 325–26; see also Locke 2013 (n 85) 32. 110 Guiding Principles (n 4) Principle 19 and Commentary. 111 OECD Guidelines (n 7) 24–25. The OECD picks up the concept of leverage, as per the Guiding Principles. 112 OECD Apparel Guidance (n 10) 53, 60, 71–73; OECD Agriculture Guidance (n 10) 32–33; 36–38; OECD General Guidance (n 15) 30–31, 77–80. See also UN Guidance (n 16) 14. 113 OECD General Guidance (n 15) 79; OECD Apparel Guidance (n 10) 72–73; OECD Agriculture Guidance (n 10) 38. See also UN Guidance (n 16) 14–15. 114 OECD Apparel Guidance (n 10) 56. 115 Chokepoints can be stages in the supply chain that constitute key points of transformation, have few actors or have visibility and control over the circumstances of production and trade upstream. 116 OECD Apparel Guidance (n 10) 56–57, 82–83; OECD Agricultural Guidance (n 10) 38. See also OECD Mining Guidance (n 10). 107

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Human rights due diligence and the (over) reliance on social auditing  127 governments as a means of maintaining effective controls further along the seafood supply chain.117 These recommendations highlight that true due diligence requires companies at the head of supply chains to take active steps beyond social auditing, and consider how the overall nature of their relationship with suppliers impacts their ability to influence social compliance. 6.2

Purchasing Practices

The purchasing practices of buyers at the top of the supply chain also have a significant impact on the conditions faced by workers. Such practices tend to be influenced by broader market pressures, including short-term profit expectations by shareholders, pricing expectations from consumers and evolving market demands, which propel the ongoing search for lower production costs, innovation and reduced lead times in bringing new products to market.118 These issues are present in a range of sectors and industries, but have been specifically highlighted in the manufacturing sector. For example, in the electronics sector pressures are exacerbated by rapid technological obsolescence, while in the apparel sector increasing pressure has come from the rise of lean retailing and fast fashion.119 These factors combined result in fluctuating and volatile orders and severe price competition, which in turn places pressure on suppliers. Common buying practices include shortened production deadlines and production lead times, last minute changes in orders, delays in approval and fluctuations in and insecurity of orders. These practices lead to the imposition of volatile and unreasonable production targets and deadlines on suppliers. The brunt of this is felt by workers, who are subjected to variable working hours, excessive and forced overtime, limitations on leave and breaks and unsafe working conditions in an attempt to meet the commercial expectations of buyers. 120 Further, the relative power of buyers allows them to conduct aggressive price negotiations, leading to outcomes that do not reflect the true cost of production. Labour costs are not itemized and buyers often refuse to take into account rises in minimum wages or overtime and social benefits, let alone the costs of health and safety improvements and training. Rather,

ILO Fishers First (n 85) 47. Oxfam 2004 (n 98) 32–38; Helle Bank Jørgensen et al, ‘Strengthening Implementation of Corporate Social Responsibility in Global Supply Chains’ (World Bank, Washington DC, October 2003) 28–30. 119 Locke 2013 (n 85) chapter 6; Oxfam 2004 (n 98) 51; Appelbaum & Lichtenstein (n 102) 112–13; Martin-Ortega et al, ‘Buying Power and Human Rights in the Supply Chain: Legal Options for Socially Responsible Public Procurement of Electronic Goods’ (2015) 19(3) The International Journal of Human Rights 341–68 (Martin-Ortega et al) 343–44; Ian Taplin ‘Global Commodity Chains and Fast Fashion: How the Apparel Industry Continues to Re-Invent Itself’ (2014) 18(3) Competition & Change 246. 120 Oxfam 2004 (n 98) 32–39, 48–63; Martin-Ortega et al (n 119) 342–44; HRW Cambodia (n 98) 38–39; Anner et al 2013 (n 106) 8–14; Clean Clothes Campaign 2009 (n 86) 45–51; BetterWork, ‘Progress and Potential: A Focus on Sourcing Practices from a Factory Perspective’ (2016); ETI Norway, ‘Suppliers Speak Up: How Responsible Purchasing Practices Can Improve Working Conditions in Global Supply Chains’ (2014) (ETI Norway); Patsy Perry, Steve Wood and John Fernie, ‘Corporate Social Responsibility in Garment Sourcing Networks: Factory Management; Perspectives on Ethical Trade in Sri Lanka’ (2015) 130 Journal of Business Ethics 737, 740. 117 118

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128  Research handbook on human rights and business suppliers are expected to absorb the costs of social compliance through improved productivity; yet productivity gains on their own are rarely sufficient. 121 The above practices can also lead to greater reliance on unauthorized sub-contractors and temporary contract workers, as suppliers attempt to keep up with fluctuating demand, production delays and time, price and volume pressures. The use of unauthorized sub-contracting and temporary workers has significant human rights implications, with such workers frequently being some of the most vulnerable and exploited in the supply chain.122 Despite the increased human rights risks arising from these practices, (unauthorized) subcontracted and temporary workers are usually not picked up by social audits of first tier suppliers.123 Significantly, a number of due diligence frameworks recognize that companies have a responsibility to assess the impact of, and take appropriate action in respect of, purchasing practices. The latest UN Guidance specifically states that ‘each business enterprise should ensure that its own practices, for example … irresponsible purchasing practices, or low-cost, fast-delivery business models, do not contribute to adverse human rights impacts caused by entities in the value chain’.124 The OECD Apparel and Agriculture Guidelines both provide that companies should assess whether their purchasing practices contribute to harm, and implement control measures and policies accordingly. Suggested control measures include taking into account the costs of wages, benefits and investments in decent work in pricing models, setting final order placement dates, improving forecasting, sharing purchasing plans with suppliers and easing pressure on suppliers.125 Similarly, the GRI Standards also refer to purchasing practices (albeit less directly) as a component of appropriate action. Companies are directed to consider the extent to which they incentivize suppliers to address negative social impacts, as well as their own procurement practices.126 Some multistakeholder initiatives are also encouraging their members to consider these issues.127 Initial evidence however suggests that most companies are currently doing little to address their own purchasing practices. For example, the CHRB found that in the apparel and agricultural industries, only 16 per cent of companies had publicly demonstrated how they avoid practices that undermine human rights, or provide positive incentives to suppliers.128 Further, 121 Clean Clothes Campaign 2009 (n 86) 49–51; Oxfam 2004 (n 98) 54–55; Anner et al 2013 (n 106) 8–14; HRW Cambodia (n 98) 38–39; Vogel 2008 (n 99) 274; ETI Norway (n 120) 13–18; Li-Wen Lin, ‘Corporate Social Accountability Standards in the Global Supply Chain: Resistance, Reconsideration, and Resolution in China’ (2007) 15 Cardozo Journal of International & Competition Law 321, 335–36. 122 NYU Report (n 86) 17–26; HRW Bangladesh (n 86); HRW Cambodia (n 98) 94–95; Oxfam 2004 (n 98) 60–61; Clean Clothes Campaign 2009 (n 86) 41–43; Asia Floor Wage Alliance, ‘Precarious Work in the H&M Global Value Chain’ (2016) 123 Barrientos & Smith 2007 (n 87) 722–23. 124 UN Guidance (n 16) para 48. 125 OECD Apparel Guidance (n 10) 45–46, 69–70 (notably, the OECD Apparel Guidance encourages companies to implement control measures as preventative measures, even if they have not identified specific contributions to harm through their purchasing practices); OECD Agriculture Guidance (n 10) 37. 126 G4 Guidelines, Implementation Manual, 167–70; GRI Standard 414: Supplier Social Assessment 2016. 127 See for example FWF’s ‘Brand Performance Checks’ ; and the ETI’s Guide to Buying Responsibly (7 September 2017) . 128 CHRB 2017 (n 60).

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Human rights due diligence and the (over) reliance on social auditing  129 our review of the UNGPRF database found that only 10 per cent of the sample companies were actively addressing this issue. Ultimately, the purchasing practices outlined above undermine a supplier’s ability to implement appropriate standards and improve working conditions. Social auditing, with its supplier focus, is clearly not capable of addressing these issues; nor was it ever designed to do so.129 The appropriate action component of due diligence requires that buyers also come to the table, and factor compliance into their own practices and business models.

7. CONCLUSION The development and growing refinement of the concept of human rights due diligence in recent years allows for some (albeit limited) cause for optimism in the business and human rights field. However, the lack of effective implementation and the continued reliance on social auditing as the primary tool of due diligence temper that optimism. Inherent limitations in the manner in which social auditing is conducted weaken its ability to perform even a basic diagnostic function, while its inability to address broader structural issues – a function that it was arguably never designed to undertake – render it completely inappropriate as a tool for remediation and change. These failures have led numerous critics to observe that social auditing is ultimately more concerned with preserving and legitimizing existing business models that favour corporate interests than with truly addressing the transformations required to combat human rights violations.130 In order to meaningfully address the human rights impacts of global supply chains, it is incumbent upon both governments and companies to move beyond their heavy reliance on social auditing and embrace a more comprehensive due diligence programme. Legislation that both mandates due diligence and provides guidance on its format (for instance by incorporating reference to OECD sector specific guidance) is a necessary step that could significantly improve the regulation and transparency of supply chains.

129 Genevieve LeBaron, Jane Lister and Peter Dauvergne, ‘Governing Global Supply Chain Sustainability through the Ethical Audit Regime’ [2017] Globalizations 1 (LeBaron & Lister 2017); ETI, Auditing Working Conditions (n 73). 130 LeBaron & Lister 2017 (n 129); Anner et al 2013 (n 106).

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7. Humanising the global supply chain: building a ‘decent work’ environment in the readymade garments supply industry in Bangladesh Mia Mahmudur Rahim

1. INTRODUCTION There is an intrinsic relationship between business and human rights within society.1 Business plans and operations are created and executed by humans, and the outcomes of business activities predominantly aim to serve human society. Indeed, the relationship between business and human rights is undeniable.2 The Economist surveyed 853 senior corporate executives in 2014 and revealed that 83 per cent of these executives consider human rights a matter of their business and governance.3 It is thus timely to discuss how to progress this relationship, rather than simply how business and human rights are related. Today, business through global supply chains is increasing at a frenetic pace. Business in almost every industry is connected either to buyer-driven global supply chains or supplier-driven global chains. Business through buyer-driven global supply chains is a common practice in labour intensive industries, including garments, toys, coffee, shoes and tomato production. Hence labour rights and practices in the buyer-driven global supply chain dominate discussion regarding the improvement of global human rights conditions. However, current business practices in this global chain often undermine initiatives to improve compliance with labour rights. Also, there is a large amount of literature suggesting that many developing and least developed countries are more interested in meeting the demand for jobs than in raising the quality of the jobs created, and are thus keen to attract jobs through global brands and retailers. Global brands and retailers, however, generally do not invest in these countries. Instead they typically contract out the labour intensive parts of their product manufacturing to improve efficiency without paying the labour cost they would otherwise be liable to pay if they utilised labour in their own countries. Global readymade garment (RMG) retailers/brands in Bangladesh are thus a suitable context of study. How to raise labour rights and conditions in the global RMG industry is a contentious issue. The concept of ‘decent work’ and programmes around this concept introduced by the International Labour Organization are noteworthy, among various international initiatives, for

1 Nolan J, The Relationship of Human Rights to Business, in Business and Human Rights: From Principles to Practice, eds D. Baumann-Pauly and J. Nolan (Routledge 2016). 2 Human Rights Council, ‘Guiding Principles of Business and Human Rights: Implementing the United Nations’ “Protect, Respect and Remedy” Framework’ (United Nations 2011). 3 The Economist Intelligence Unit, The Road from Principles to Practice – Today’s Challenges for Business in Respecting Human Rights (Economist Intelligence Unit 2015).

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Humanising the global supply chain  131 their industrial relations stability.4 This concept denotes that the ‘aspiration of people in their working lives’ is the key for a sustainable workforce and this aspiration can be ensured in the working lives of a country if a country has effective programmes on access to employment, pay equity, workers’ voice and participation in labour administration.5 In assessing the current programmes for ‘decent work’ it is therefore vital to understand the state of workers’ rights and development opportunities at an industry level. This is the aim of this chapter. Taking the readymade garments (RMG) industry in Bangladesh as a representative sample of major garments manufacturing industries around the world, this chapter assesses the condition of the rights necessary to enhance decent work in an established global supply industry. Section 2 provides a short note on the tenets of ‘decent work’. Section 3 describes the global supply chain framework and the RMG supply industry in Bangladesh. Additionally, it explores the rights of workers to a reasonable wage, safe work environment, and freedom of association in this industry. Section 4 assesses the current programmes surrounding these rights and highlights that this country could consider including ‘new governance’ approaches into its labour regulation framework in order to ensure ‘decent work’ in this industry, which is the second largest industry of its kind worldwide. Section 5 concludes the chapter.

2.

‘DECENT WORK’ AND THE DEVELOPMENT OF LABOUR RIGHTS

Various strategies have been implemented to raise labour rights conditions in supply industries in developing and least developed countries. Among these strategies, the ‘decent work’ principles of the ILO, the codes of conduct initiated by the private ordering regime and several programmes undertaken by governments are noteworthy. The following section of this chapter focuses on the implementation of the ‘decent work’ principle in the global supply industry. The ILO Declaration on Fundamental Principles and Rights at Work made it clear that ‘decent work’ is an important concept that should guide the development of a labour-friendly environment at the industry level. ‘Decent work’, as a socio-legal programme, is based on four themes: access to employment; promotion of rights at work; social protection; and social dialogue.6 In this programme, employment is considered not only a means of sustaining life and meeting basic human needs but also an activity that affirms individual identity and provides personal satisfaction.7 It is the way in which individuals strive to develop their potential and use their skills to contribute to the collective wellbeing. It considers rights in the workplace to be a primary need for the development of a sustainable work environment and refers to social

International Labour Organization, ‘Decent Work Country Programmes’ (2018) www​.ilo​.org/​asia/​ decentwork/​dwcp/​lang​--​ en/​index​.htm accessed 4 January 2018; International Trade Union Confederation ‘World Day for Decent Work’ (2019) www​.ituc​-csi​.org/​world​-day​-for​-decent​-work accessed 4 January 2019. 5 International Labour Organization, ‘Decent Work’ (4 January 2019) www​.ilo​.org/​global/​topics/​ decent​-work/​lang​-​-en/​index​.htm accessed 4 January 2019; ILO, ‘Reducing the Decent Work Deficit: A Global Challenge’ (International Labour Organization 2001); Ghai D, ‘Decent Work: Concept and Indicators’ (2003) 142(2) International Labour Review 113–45. 6 ILO, ‘Decent Work’ (International Labour Organization 1999). 7 Fields GS, ‘Decent Work and Development Policies’ (2003) 142(2) International Labour Review 239–62, 240. 4

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132  Research handbook on human rights and business protection as a means to protect labourers in general from the vulnerabilities and contingencies of labour. It considers social dialogue a vital process required for the development of a sustainable and labour-friendly environment at the industry level. An efficient implementation of this programme should help employers and employees to minimise their differences, defend their rights and ensure social equity.

3.

‘DECENT WORK’ IN THE BANGLADESH RMG SUPPLY INDUSTRY

It is worth providing a short description of the global supply chain framework here, as the RMG supply industry in Bangladesh falls within this framework. A description of this framework arms the reader with a better understanding of the interface between the actors involved in a global supply industry. 3.1

Global Supply Chain Framework

The global supply chain is a quasi-hierarchical relationship between buyers and producers, in which the two parties are not joined by ownership, but are engaged in a long-term relationship. The two most prominent parties in the global supply chain framework are global buyers and suppliers. However, the dominant party in a buyer-driven global supply relationship is the buyer; a buyer defines who is incorporated in the chain and what standards they must meet. Most of the global buyers are either big business or retailers. For example, the buyers in the readymade garments global supply chain are multinational retail companies and brands such as H&M, New Look, Wal-Mart, GAP, Zara, Target, Carrefour, and JCPenney.8 These companies have liaison offices in sourcing countries to manage the relationship with their supply firms.9 Through the liaison firms, global buying companies try to ensure that their suppliers maintain decent work conditions that are acceptable to Western consumers.10 Through buyer-driven global supply chains, multinational retailers and brands source their products from labour-intensive countries where governments are desperate to obtain a rapid increase in foreign income and are less focused on programmes to uphold even the most basic human rights of their citizens working in global supply industries. In such a situation, global buying firms follow the philosophy of relativism, because this provides a cost advantage and allows them to claim that they are doing nothing unethical if they simply follow the hosting country’s existing unacceptable wage and working conditions.11 Relying on this philosophy, they usually argue that they do not have the right to interfere with the labour regulations of another country, and are respecting the host country’s culture. They aim to purchase high-quality products at low prices that are made in a socially responsible manner, but reluc Study, ‘Garment Buyers: Major Garment Buyers in Bangladesh’ (2015). Yasmin T, ‘Unsafe Working Conditions in the RMG Sector of Bangladesh: Role of the International Retailers’ [2014] South Asia Journal 11. 10 Kolk A and R Van Tulder (2002) ‘The Effectiveness of Self-Regulation: Corporate Codes of Conduct and Child Labour’ (2002) 20(3) European Management Journal 260–71. 11 Haque MZ and F Azmat (2015) ‘Corporate Social Responsibility, Economic Globalization and Developing Countries: A Case Study of the Ready-Made Garments Industry in Bangladesh’ (2015) 6(2) Sustainability Accounting, Management and Policy Journal 166–89. 8 9

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Humanising the global supply chain  133 tant to increase production costs and effectively assist a decent work environment building for this industry effectively. Lin calls this ‘policy schizophrenia’ at the buyer’s end within the global supply chain.12 This situation pushes the supply firms to appear to demonstrate socially responsible practices without making adequate and effective changes.13 The practice of the RMG factories regarding the use of their effluent plants would further explicate this situation. Shah and Rana find that the RMG factory owners in the Bangladesh Small and Cottage Industries Corporations zone in Tongi built drainage to pass their waste into the Turag River.14 Most of these factories have effluent plants, constructed as a requirement for obtaining orders from high-profile buying firms, but only use them when buyers and governmental agencies are scheduled to conduct inspections. It is not impossible to find the source and end point of the drainage that carries the waste into the river; in fact, the auditors of the buying agencies and concerned governmental officers know about such practices, but do not take adequate and effective measures against them. As such, hundreds of tonnes of toxic liquids enter the Turag River every day; now the water in this river contains only 0.4–0.5 mg/litre of oxygen and is losing its usual volume of flow, and the local villagers are now exposed to a toxic environment. Such a situation also distorts the creation of a decent work environment and the wellbeing of the labourers living near their factories. As such, the labourers’ collective roles in overseeing the impact of such industrial practice is vital. The lack of effective institutions, inadequate workforce, corruption and slack governmental commitment to the development of workers’ political rights, however, has left these supply firms ‘subject to very little or no oversight’.15 Buyer-driven global supply chains involve a myriad of parties in different geographical locations and with diverse abilities to perform a broad range of functions. It is crucial to develop cross-border labour relations to improve labour rights conditions in these chains. However, the global framework agreements between global labour union federations and transnational corporations and international organisations have to date played an insufficient role in promoting labour relations in global supply chains. There is no overarching global covenant for the labour relations in this chain and the global social dialogue initiated by organisations such as Global Compact is still nascent. At this juncture, a mixture of management-driven programmes, initiatives at the country level and a multistakeholder approach is used to ensure ‘decent work’ in global supply chain-based industries, particularly in developing and least developed countries. In this context, an analysis of how and to what extent this mixed model ensures ‘decent work’ in the buyer-driven global supply industry is essential. The following parts of this section endeavour to examine this in more detail.

12 Lin LW, ‘Corporate Social Accountability Standards in the Global Supply Chain: Resistance, Reconsideration, and Resolution in China’ (2007) 15 Cardozo Journal of International & Comparative Law 321. 13 Yasmin T, ‘Unsafe Working Conditions in the RMG Sector of Bangladesh: Role of the International Retailers’ [2014] South Asia Journal 11; Jørgensen HB et al, Strengthening Implementation of Corporate Social Responsibility in Global Supply Chains (World Bank 2003); Roberts DP et al, ‘Secrets, Lies, and Sweatshops’, Business Week (2006) 27: 50–8. 14 Shah J and M Rana, ‘Industrial Waste Polluted the Turag’, The Prothom Alo (6 September 2018), Sarker S, ‘ETP Plants are Inactive, Villages and Rivers are Facing Acute Industrial Pollution’, The Prothom Alo (20 April 2011). 15 Labowitz S and D Baumann-Pauly, Beyond the Tip of the Iceberg: Bangladesh’s Forgotten Apparel Workers (NYU Stern Center for Business and Human Rights 2015).

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134  Research handbook on human rights and business 3.2

The Bangladesh RMG Supply Industry

Bangladesh is the second largest RMG exporter worldwide. This industry is divided into two major components, namely, knitting factories and woven factories. Currently, there are more than 6,525 factories and 4.5 million workers, of whom 60 per cent are female.16 Out of the 6,525 factories, 4,437 have the capacity to directly relate to RMG export.17 In 2017 their exports amounted to U$29.21 billion.18 Among the leading global retailers and brands, H&M and Wal-Mart are the most significant purchasers from this industry; Wal-Mart purchases one billion US dollars’ worth of garments from Bangladesh every year. The comparatively low labour cost is the main reason for the double digit rates of expansion in this industry from year to year. 3.2.1 Labour rights in the Bangladesh RMG supply industry Labour rights in the Bangladesh RMG supply industry are at a critical juncture. It has largely addressed concerns relating to child workers, a traditional culture of job segregation and severe challenges regarding the improvement of workers’ collective engagement in labour management.19 However, this industry is under global scrutiny for its failure to create a system to facilitate regular wage increases, ensure a safe work environment and provide adequate arrangement for labour empowerment. This section assesses how the industry is dealing with labourers’ right to a reasonable wage, freedom of association, and the right to a safe work environment. 3.2.1.1 Wage equity This industry has been at the centre of a wave of massive strikes and worker protests over the past 20 years. Massive labour turmoil was experienced in 2006, 2010 and 2014 as a result of low wages. The Minimum Wage Board – ‘mainly guided and determined by the government’20 – has increased the minimum wage of Bangladeshi RMG workers five times in the past via a ‘stop-go’ approach. In 1994 the Minimum Wage Ordinance fixed the minimum wage for this sector at U$13.29 per month.21 In June 2006, this minimum wage was raised to U$23.74. Workers protested this Ibid. Note that all the members of the BGMEA are not always active in RMG export. In a survey, the BGMEA has reported that one fourth of their members remain inactive in each year. For a detailed study on BGMEA and its member factories, see Munni M, ‘One-Fourth of BGMEA Units Now Non-Existent or Closed’, The Financial Express (2016); Labowitz S, ‘New Data on the Number of Factories in Bangladesh’ (2016) http://​bhr​.stern​.nyu​.edu/​blogs/​-data​-on​-number​-of​-factories​-bd. accessed 24 October 2017. BGMEA, ‘Trade Information’ (2017) www​.bgmea​.com​.bd/​home/​pages/​TradeInformation accessed 4 January 2019. 18 BGMEA, ‘Trade Information’ (2017) www​.bgmea​.com​.bd/​home/​pages/​TradeInformation accessed 4 January 2019. 19 UNICEF, ‘Ready-made Garment Sector and Children in Bangladesh’ (2019); Sharifuzzaman, ‘Bangladesh Responded to ILO Pressure’, The Prothom Alo (3 September 2018). 20 Moazzem KG et al, ‘Wage Fixing Institutions and Their Impacts in Major Garment Producing Countries: The Case of Bangladesh’ (Centre for Policy Dialogue, Bangladesh 2015). 21 Majumder PP and A Begum, ‘The Gender Impact of Growth of Export Oriented Manufacturing in Bangladesh: Case Study: Ready-made Garment Industry Bangladesh’ (Bangladesh Institute of Development Studies 2000). 16 17

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Humanising the global supply chain  135 increase; however, the plodding progress of the industry at the time toned down their outrage. The beginning of 2009 saw the RMG sector bounce back from the global recession of 2008, with industry earnings reaching more than U$12.35 billion in 2008–9.22 In early 2010, workers demanded an increase in their wages. This time the government acknowledged the demand and insisted employers agree on a fair increase of the minimum wage. Action Aid calculated such an increase at about U$150, and the labour union demanded at least U$75, but the owners’ association fiercely resisted this demand, offering only U$40. The owner’s association argued that high bank interest rates, soaring yarn prices and low cutting and making charges made it challenging for them to offer more than U$40 for an entry level worker. They also blamed low-skilled and inefficient workers for an increase in production costs. This further lowered the already low credibility of the owners of RMG factories. While a Bangladeshi worker was paid U$0.12 per hour in 2009, her counterparts in Sri Lanka, Pakistan, India, and Vietnam received U$0.44, U$0.56, U$0.51 and U$0.40, respectively.23 The rigid and uncompromising attitude of the owners has been subject to much criticism in this regard. By the end of July 2010, the minimum wage at entry level was fixed at U$43.07, comprising U$27.57 in basic pay, U$11.03 in housing allowance and U$2.76 in medical allowance. The apprentice-level wage was fixed between U$16.54 and U$34.47. This new wage structure came into effect on 1 November 2010. This is the lowest minimum wage in Bangladesh when compared with that of five other industrial sectors, and the lowest in the world.24 The workers rejected this salary package and protested for a better one. The protest turned into massive widespread unrest as it was discovered that one fourth of RMG factory owners did not comply with the necessary scale of pay. According to the Alternative Movement for Resource and Freedom Society, 72 incidents of unrest took place in the first six months of 2010, causing injuries to at least 988 workers and leading to the arrest of 45 workers.25 After the Rana Plaza disaster and towards the end of 2013, the minimum wage was increased to U$68 from U$43.07 per month.26 Nevertheless, this wage is still one of the lowest in RMG industries around the world.27 It was slightly higher than in Sri Lanka (U$66) and far lower than in Cambodia (U$128).28 The minimum wage for an RMG worker in 2015 was U$297 in Shanghai, U$100–145 in Vietnam, U$119 in Pakistan and U$92–247 in Indonesia.29 Moreover, non-compliance with the set minimum wage and disparity between 22 BGMEA (2017) ‘Trade Information’ www​.bgmea​.com​.bd/​home/​pages/​TradeInformation accessed 4 January 2019. 23 Ahmed M, ‘Message to Walmart: Low Wages Hampers the Credibility of the Top RMG Exporting Country’, The Prothom Alo (21 July 2010). 24 Sharma V, ‘Imperfect Work Conditions in Bangladesh RMG Sector’ (2015) 57(1) International Journal of Law and Management 28–37. 25 Clean Clothes Campaign, ‘Actions for Safe Factories in Bangladesh on 5th Anniversary of Spectrum Disaster, Clean Clothes Campaign’ (2010). 26 Quadir S, ‘Rising Wages Squeeze Bangladesh Garment Makers as Factories Await Upgrades’, Reuters (2014). 27 Yardley J, ‘Bangladesh Takes Step to Increase Lowest Pay’, The New York Times (2013). 28 Cowgill M et al, ‘Minimum Wages in the Global Garment Industry: Update for 2015, Labour Standards in Global Supply Chains – A Programme of Action for Asia and the Garment Sector’ (International Labour Organization 2015). 29 ILO, ‘Wages and Productivity in the Garment Sector in Asia and the Pacific and the Arab States’ (International Labour Organization 2016).

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136  Research handbook on human rights and business the minimum wage for men and women are also pervasive in this industry.30 Employers in this industry employ various tactics to avoid paying minimum wage. For instance, there are multiple job grades set for this industry; the employers manipulate these grades and purposely leave a worker at a lower grade for long periods.31 Moazzem et al find this non-compliance prevalent in subcontracting factories: the rate of underpayment in these factories is more than 10 per cent.32 Furthermore, in both subcontracting and first contracting factories, employers are known to ‘withhold overtime payments in a perverse attempt to discourage workers from switching to other factories’.33 The gap between the actual payments made to men and women in this industry is also alarming. In 2010, the average earnings of a male worker were U$53.21, whereas a female worker’s average earnings were U$39.47.34 A study revealed that ‘a female sewing machine operator earns some 71% of a male operator’s earnings and a female helper about 53% of a male helper’s earnings’.35 Workers, mainly female workers with lower levels of education, are also more likely to receive a wage far below the minimum.36 In 2016, workers called for a strike to support the demand for an increase in the minimum wages from U$68 to U$190 per month.37 Factory owners suspended operations of 59 large factories.38 Moreover, they filed criminal complaints against more than 1,600 workers and dismissed around 3,500 workers, including most of the union leaders.39 The ministers of the government of Bangladesh, including the Prime Minister and the labour minister, supported stern action against the workers on strike. As a result, police filed formal cases against 600 workers and arrested at least 11 workers’ rights advocates and leaders.40 The minimum wage remained at $68 until the end of 2018; moreover, many labour union offices were forced to close, and many garments workers were forced to return to the countryside to escape police

Uddin SS, ‘An Analysis of the Condition of Bangladesh Female RMG Workers’ [2015] South Asia Journal 12. 31 Grimshaw D and RM Bustillo, ‘Global Comparative Study on Wage Fixing Institutions and Their Impacts in Major Garment Producing Countries (International Labour Organization 2016). 32 Moazzem KG et al, ‘Wage Fixing Institutions and Their Impacts in Major Garment Producing Countries: The Case of Bangladesh’ (Centre for Policy Dialogue Bangladesh 2015). 33 Grimshaw D and RM Bustillo, ‘Global Comparative Study on Wage Fixing Institutions and Their Impacts in Major Garment Producing Countries (International Labour Organization 2016). 34 Ibid. 35 Nirzhor T, ‘Bangladesh Garments Industry & Woman Employment’ (2016). 36 Cowgill M et al, ‘Minimum Wages in the Global Garment Industry: Update for 2015, Labour Standards in Global Supply Chains – A Programme of Action for Asia and the Garment Sector’ (International Labour Organization 2015). 37 In this year, the minimum wage in the RMG industry was U$155 in China, U$107 in Vietnam, U$137 in India, U$116 in Pakistan and U$140 in Cambodia. For details, see Tariq A, ‘Low Wage Crisis: Impacts on Bangladeshi Garment Sector Workers’ (2017) 8(1) Journal of Mass Communication and Journalism 357–61. 38 International Trade Union Confederation, ‘The 2017 ITUC Global Rights Index’ (International Trade Union Confederation 2017). 39 Ibid; Wadud M, ‘Bangladesh Garment Factories Sack Hundreds after Pay Protests’, The Guardian (27 December 2016). 40 International Trade Union Confederation, ‘The 2017 ITUC Global Rights Index’ (International Trade Union Confederation 2017). 30

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Humanising the global supply chain  137 persecution.41 In the wake of labour turmoil in this industry at the beginning of 2018, the government assigned the Minimum Wage Board to propose a new wage scale. During the negotiations at the Board, representatives for the labourers and factory owners proposed U$142.13 and U$74.49 respectively as minimum wage in the industry.42 On 13 September 2019, the government fixed the minimum wage at U$95.43 It is worth mentioning here that at the peak of inflation during 2008, there was a proposal to provide rations at a subsidised rate, but this is yet to be implemented. In addition, workers were promised better working conditions and childcare centres for mothers at factory premises, but the majority of owners did not pay any heed to these promises. The Board and the government, the labour union leaders claimed, also did not consider these matters while deciding on this new wage for this industry.44 3.2.1.2 Freedom of association Formal trade unions in the Bangladesh RMG industry are limited. Although there is confusion regarding the exact number of formal unions in this industry, it appears that 2–10 per cent of the factories within this industry have registered unions.45 There are potentially 300 registered trade unions in this industry, but it has been reported that only ‘one in ten registered trade unions can be said to be active and effective in directly influencing wages’ and one in five unions are created by the factory owners.46 In the South and South-East Asian region, the Cambodian RMG industry has the highest number of registered unions, with 2,900 active in 2013. Although registered trade unions cover only 6 per cent of the registered factories in Vietnam, these unions have had an influential role in collective bargaining.47 To date there has been minimal support for the formation of unions in Bangladesh, and indeed many factory owners have taken steps to block the formation of any formal labour union. The registration of a labour union in Habib Fashions is an illustrative example. To improve working conditions, addressing matters such as unacceptably long hours, the workers of this RMG factory formed a federation – the Sommolito Garment Sramik Federation. They applied to the Joint Director of Labour to register this foundation on 30 June 2016. On 19 July 2016, while the leaders of this federation were trying to address certain objections raised by the 41 HR Watch, ‘Bangladesh: Stop Persecuting Unions, Garment Workers’ (2017) www​.hrw​.org/​ news/​2017/​02/​15/​bangladesh​-stoppersecuting​-unions​-garment​-workers accessed 15 February 2017. 42 Suvankor K, ‘Big Industry, Inadequate Wages’, The Prothom Alo (2018). 43 Marjorie E, ‘Bangladesh Raises Minimum Wage for Garment Workers’ (2019) https://​fashionunited​ .uk/​news/​business/​bangladesh​-raises​-minimum​-wage​-for​-garment​-workers/​2018091438912 accessed 7 January 2019. The adequacy of a minimum wage is relative to the cost for maintaining the minimum standard of a five member family. A study found that the cost of maintaining this minimum standard around Dhaka was U$314 in 2016. For details, see Tariq A, ‘Low Wage Crisis: Impacts on Bangladeshi Garment Sector Workers’ (2017) 8(1) Journal of Mass Communication and Journalism 357–61. 44 ‘RMG Workers Block Dhaka-Mymenshing Highway in Uttara’ www​.thedailystar​.net/​city/​ready​ -made​-garment​-rmg​-workers​-block​-dhaka​-mymensingh​-highway​-in​-uttara​-1683709 accessed 7 January 2019; ‘Minimum Wage: RMG Workers’ Countrywide Demo Sep 21’ www​.thedailystar​.net/​country/​ bangladesh​-garment​-rmg​-workers​-minimum​-wage​-stage​-demo​-september​-21​-1635970 accessed 6 January 2019. 45 International Trade Union Confederation, ‘The 2017 ITUC Global Rights Index’ (International Trade Union Confederation 2017). 46 Moazzem K et al, ‘Wage Fixing Institutions and Their Impacts in Major Garment Producing Countries: The Case of Bangladesh’ (Centre for Policy Dialogue Bangladesh 2015). 47 Grimshaw D and RM Bustillo, ‘Global Comparative Study on Wage Fixing Institutions and Their Impacts in Major Garment Producing Countries (International Labour Organization 2016).

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138  Research handbook on human rights and business Joint Director of Labour, they were asked by the factory owner to withdraw this application. The labour leaders refused to comply. On 27 July 2016, the factory declared closure and began shifting its machinery. The factory owner has the right to declare closure of the factory, but this should be supported by valid reasons and followed by the declaration of a compensation package for the labourers. Habib Fashion did not follow any of these steps. This has raised concerns that the closure was purely to defeat the process of the formation of a labour union and to ‘discourage any future attempts at organizing any collective force for labourers’.48 The government’s stance regarding the development of workers’ unions in this industry is unclear.49 Although the recent amendment of the Bangladesh Labour Act 2006 allows labour unionism, the requirements mentioned in the Bangladesh Labour Rules 2015 for the registration of a labour union are ‘excessive’ and largely ‘unreasonable’.50 For instance, they require that more than 20 per cent of workers agree to form a union, and vaguely define the power of the government to cancel a union’s registration.51 This Act bans trade union offices within 200 yards of the factory and strictly prohibits union activities during working hours.52 This Act even empowered the government to ban the operation of several rules affecting labourers in factories situated in Export Processing Zones (EPZs). Under Sections 55 and 59 of the EPZ Workers Association and Industrial Relations Act 2004, the government is responsible for establishing labour tribunals and labour appellate tribunals in EPZs. However, the government is yet to take any useful step to this end. While trade unions are not legally allowed in EPZs, the government’s failure to ensure an effective forum for settling labour disputes is, in fact, a denial of access to justice of the workers in these zones. This is a fundamental setback in the development of a decent and sustainable working environment for the labourers in this industry.53 Industrial collective bargaining is rare in the Bangladesh RMG industry. In fact, collective bargaining is still underdeveloped in most of the leading RMG supply industries. The 425 registered collective agreements in the Cambodian RMG industry have not driven important change; these agreements mainly replicate the minimum standards mentioned in the legislation.54 This has resulted in a social dialogue vacuum, which has increased both industrial rela-

International Trade Union Confederation, ‘The 2017 ITUC Global Rights Index’ (International Trade Union Confederation 2017). 49 Locke RM, We Live in the World of Global Supply Chains, in Business and Human Rights: From Principles to Practice, eds D Baumann-Pauly and J Nolan (Routledge 2016). 50 International Trade Union Confederation, ‘The 2017 ITUC Global Rights Index’ (International Trade Union Confederation 2017).The government has recently amended several provisions of this Act. Among the important changes the Bangladesh Labour (Amendment) Act 2018 brought into the labour regulations of Bangladesh are: the punishment for enforcing strike illegally has been reduced to six months from one year; compensation for natural death of a worker has been increased to U$2361 from U$1180; abolition of any sort of child labour; a union now can strike if it can gain 50 per cent of its members’ support. 51 International Trade Union Confederation, ‘The 2017 ITUC Global Rights Index’ (International Trade Union Confederation 2017). 52 Sharma V, ‘Imperfect Work Conditions in Bangladesh RMG Sector’ (2015) 57(1) International Journal of Law and Management 28–37. 53 Khan S, ‘Trade Unionism and Minimum Wages Issue in Apparel Industry’, The Financial Express (Dhaka 2010). 54 Prake Organisation, ‘Collective Agreements in Cambodia’ www​ .prake​ .org/​ home/​ labour​ -law/​ collective​-agreements​-database accessed 20 October 2017. 48

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Humanising the global supply chain  139 tions conflicts and revenge tactics by employers in this industry. Almost all of the labour unrest experienced in Bangladesh in recent years was related to the RMG industry.55 Meanwhile, there were around 300 wildcat strikes in the Cambodian RMG industry in 2013–14,56 and the Vietnam RMG industry accounts for almost half of the nationwide strikes experienced.57 Such unrest indicates that harassment, redundancies and discrimination against protesting workers have increased in this industry.58 The government of Bangladesh is not only passive towards workers’ and unions’ demands but also does not take adequate measures to control the surge of ‘yellow unions’ formed by the employers in this industry to dilute the capacity of unions.59 3.2.1.3 Safety at work The lack of workers’ participation in labour and work environment management in the Bangladesh RMG industry has been complemented by the greed of owners and a lack of political commitment. All of these are linked with the predominantly unsafe work environment in this industry. The Tazreen Fashions Ltd (Tazreen) fire and the Rana Plaza collapse illustrate recent disasters. Tazreen Fashions Ltd (Tazreen) produces ready-made garments and supplies them to many well-known retail brands globally. On 25 November 2012, a tragic incident occurred that claimed the lives of 112 employees. There are several contributing factors to incidences of fire in the RMG industry, including full production lines, electric short circuits and poor wiring, non-containment of flammable chemicals, faulty fire extinguishers and fire exits being blocked by inventory. In this particular instance, the fire led to workers – mostly female – being trapped, asphyxiated, burnt or forced to jump to their deaths to escape being burnt alive. This situation should never have come about. Tazreen is a member of the Bangladesh Garments Manufacturers and Exporters Association (BGMEA) and has been a participant in the buyer-driven global supply chain for more than 12 years. At the time of the tragic incident, Tazreen had a contract for RMG production with Wal-Mart. There are strong indications that multiple Wal-Mart suppliers were using Tazreen as recently as April of 2012, and at least one

Khan S, ‘Trade Unionism and Minimum Wages Issue in Apparel Industry’, The Financial Express (Dhaka 2010). 56 Reeve M and HS Hwang, ‘Cambodian Industrial Relations’ (International Labour Organization 2015). 57 Chi DQ and N Torm, ‘Wage Fixing Institutions and Their Impacts in Major Garment Producing Countries: The Case of Vietnam International Labour Organization’ (International Labour Organization 2015). 58 Grimshaw D and RM Bustillo, ‘Global Comparative Study on Wage Fixing Institutions and Their Impacts in Major Garment Producing Countries (International Labour Organization 2016). 59 Ibid. There is no accepted definition of ‘yellow union’. In general, this term denotes the workers’ associations that are either controlled or financed by the employers, and do not have the capacity to independently work for the general workers. Article 2 of the ILO Convention describes such unions negatively interfering with the sustainable development of the relationship between the workers and employers in any industry. Yellow unions, including the workers’ committees backed by the RMG factory owners in Bangladesh, never received adequate support from the general workers. Hence their role in workers’ safety and wellbeing in this industry is not only questionable but also negligible. For a detailed study on this matter, see Khan MRI and C Wichterich, ‘Safety and Labour Conditions: The Accord and the National Tripartite Plan of Action for the Garment Industry of Bangladesh’ (Global Labour University 2015). 55

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140  Research handbook on human rights and business was filling a Wal-Mart contract when the fire broke out.60 It is also evident that Wal-Mart conducted an audit of Tazreen’s social responsibility practices, and it was noted as being a risky factory. In a situation of non-compliance in a supply firm, the global buying firm usually follows two options: (a) ‘cut and run’ or (b) a remediation process.61 Wal-Mart could have initiated a remediation process, creating a corrective action plan in collaboration with Tazreen, governmental agencies and other stakeholders. However, it chose not to, and instead continued its relationship with Tazreen as it stood until the tragic incident occurred. Within one year of this disaster, the industry experienced the most devastating incident in its history, on 24 April 2013. Rana Plaza, an eight-storey factory building in which more than 4,000 people were working, collapsed. This incident killed 1,139 RMG workers and seriously injured at least another 2,500.62 The garments industry may be global, but many argue that the blame for this disaster should primarily be local, apportioned to local governance failure, corruption and ineptitude that allowed Rana Plaza to be illegally built and occupied in the first place: the building permit was granted by an office that was not authorised to issue such permits.63 The disaster can also be attributed to the attitude of the RMG factory owners as a whole with regard to the benefit, safety and well-being of their workers.64 Management refused to evacuate the building when large cracks appeared on walls, even after safety engineers told them not to let workers inside.65 The employees told IndustriALL union federation representatives that they would be docked three days’ pay for each absent day, and so went inside despite their fears.66 Disasters such as these reveal that the buying and supplying firms in this industry, and the government, mostly consider immediate goals and do not think ethical, social and long-term economic issues relevant to labour rights, safety and wellbeing. This is not new: it is indicative of the pervasive culture within the industry. Positive change in this situation over the past ten

Al-Mahmood, SZ et al, ‘Bangladesh Fire: What Wal-Mart’s Supplier Network Missed’, The Wall Street Journal (10 December 2012) www​.wsj​.com/​articles/​SB100014241​27887324024004​ 578169400995615618 accessed 6 January 2019. 61 Dickson MA et al, Social Responsibility in the Global Apparel Industry (Fairchild Books 2009). 62 Bhattacharjee SS, ‘Precarious Work in the H&M Global Value Chain’ (Workers Voices from the Global Supply Chain 2016) http://​asia​.floorwage​.org/​workersvoices/​reports/​precarious​-work​-in​-the​-m​ -global​-value​-chain. 63 Rahim MM, ‘Improving Social Responsibility in RMG Industries through a New Governance Approach in Laws’ (2017) 143(4) Journal of Business Ethics 807–26. 64 Chepesiuk R, ‘South Asia’s Women Garments Workers’, The Daily Star (2004); Dhaka Belal AR and DL Owen, ‘The Views of Corporate Managers on the Current State Of, and Future Prospects For, Social Reporting in Bangladesh: An Engagement-Based Study’ (2007) 20(3) Accounting, Auditing & Accountability Journal 472–94; Rahim MM and S Alam, ‘Convergence of Corporate Social Responsibility and Corporate Governance in Weak Economies: The Case of Bangladesh’ [2013] Journal of Business Ethics 1–14. 65 Bacon D, ‘Who Pays the Real Price of Your Shirt?’ The Progressive (2013); Rahim MM, ‘Improving Social Responsibility in RMG Industries through a New Governance Approach in Laws’ (2017) 143(4) Journal of Business Ethics 807–26; Manik JA and N Najar, ‘Bangladesh Police Charge 41 With Murder Over Rana Plaza Collapse’, The New York Times (2 June 2015). 66 Ibid; Bacon D, ‘Bangladesh Factory Disaster Highlights Regulatory Failures’, The Financial Times (25 April 2013). 60

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Humanising the global supply chain  141 years is severely lacking; workers in this industry are still obligated to work in a highly unsafe environment.67 The International Trade Union Confederation (ITUC) assesses the current state of labour rights in every country. Some of the criteria for this assessment are ‘civil rights’, ‘collective bargaining rights’, the right to strike, the right to freely associate and access to due process rights.68 In its latest assessment, the ITUC ranked Bangladesh in the bottom ten in the world for workers’ rights.69 In its latest white paper on labour relations in the Bangladesh RMG industry, the Clean Clothes Campaign (CCC) blames the government and employers for this situation, and along with four global labour organisations it has recently urged the European Union to reconsider the Generalized System of Preferences provided to this industry.70 Anner argues that this situation is an outcome of the labour regime controlled by the market. He divides the global supply chain related labour markets into three components: (a) authoritarian state labour control regime; (b) market labour control regime; and (c) employer labour control regime.71 He denoted the global supply chain-related labour market in Bangladesh under the ‘market labour control regime’, where market conditions that work against basic labour rights exert control on labourers. The link between a worker’s active participation in a labour union and the risk of job loss, prolonged unemployment and underemployment is an illustrative example of conditions in this regime.72 Conditions such as these assist employers and governments in low-income countries like Bangladesh to control the formation of the core institutions like labour unions in the RMG supply industry.

67 Ahmed N and D Nathan, ‘Improving Wages and Working Conditions in the Bangladeshi Garment Sector: The Role of Horizontal and Vertical Relations’ (Capturing the Gains 2014); Khan MRI and C Wichterich, ‘Safety and Labour Conditions: The Accord and the National Tripartite Plan of Action for the Garment Industry of Bangladesh’ (Global Labour University Working Paper 2015); Sharma V, ‘Imperfect Work Conditions in Bangladesh RMG Sector’ (2015) 57(1) International Journal of Law and Management 28–37. 68 Sourcing Journal Online, Report: The World’s 10 Worst Countries for Workers (Sourcing Journal 2017). 69 International Trade Union Confederation, ‘The 2017 ITUC Global Rights Index’ (International Trade Union Confederation 2017). 70 GSP is a European Union scheme that allows Bangladeshi garments a duty-free access to the EU market subject to certain conditions. One of these conditions is that the industry must maintain a decent work environment for the society and workers. For details, visit http://​ec​.europa​.eu/​trade/​policy/​countries​ -and​-regions/​countries/​bangladesh/​. For the CCC White Paper, visit https://​cleanclothes​.org/​resources/​ publications/​the​-european​-union​-and​-the​-bangladesh​-garment​-industry​-the​-failure​-of​-the​-sustainability​ -compact/​view. For a discussion on this, see ‘ETUC: No More Excuses: New Evidence Reveals EU Action on Bangladesh Labour Rights Abuses Long Over-due’ available at http://​europeanmovement​.eu/​ news/​etuc​-no​-more​-excuses​-new​-evidence​-reveals​-eu​-action​-on​-bangladesh​-labour​-rights​-abuses​-long​ -over​-due. The BGMEA leaders rejected this white paper and argue that with some recent changes in the labour laws Bangladesh has already fulfilled the basic tenets of the ILO Convention. They believe that there will be additional changes in the legislation soon, which will ensure adequate labour rights in this industry. For details, see ‘Five Global Unions Wants GSP Review’ available at http://​www​.prothom​-alo​ .com/​economy/​article/​1347031/​ accessed 8 March 2020. 71 Anner M, ‘Labor Control Regimes and Worker Resistance in Global Supply Chains’ (2015) 56(3) Labor History 292–307. 72 Ibid.

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142  Research handbook on human rights and business

4.

ENSURING ‘DECENT WORK’ IN THE RMG SUPPLY INDUSTRY OF BANGLADESH

The implementation of the themes of ‘decent work’ in the RMG industry is a serious issue. The labour laws of Bangladesh incorporate most of these themes, and this country is a signatory of the major international treaties related to the wellbeing of labourers in industries. However, the traditional mindset of factory owners, lack of efficiencies in government initiatives, and slack commitment of the global buying firms/retailers to upholding these themes has left this industry’s overall labour rights conditions below the standards required for the maintenance of a decent work environment. A firm commitment and effective involvement of stakeholders are of the utmost importance for the success of any ‘decent work’ programme. The recent deadly incidents, including the fire in Tazreen Fashion Ltd and the collapse of Rana Plaza, have emphasised that it is not only up to the governments of the sourcing countries; other stakeholders, such as global buyers, suppliers and consumers, should contribute to ensuring ‘decent work’ in labour intensive industries. In particular, the collapse of Rana Plaza reveals the accountability of all stakeholders. The government of Bangladesh has created several policy guidelines, changed a handful of laws and committed to a massive shift in the labour administration in this industry.73 Three of the most noteworthy actions taken by the government are the announcement of a new pay scale for industry workers, adoption of the National Tripartite Plan of Action on Fire Safety and Structural Integrity in the garment sector of Bangladesh and support for some international organisations, including the ILO and global RMG retailers/brands, to implement programmes for workers’ wellbeing. A short note on the programmes of the Alliance for Bangladesh Worker Safety (Alliance), the Accord on Fire and Building Safety in Bangladesh (the Accord) and Better Work Bangladesh is worthwhile here. From 2013, the Alliance has run a significant safety programme in the Bangladesh RMG industry. The Alliance is a legally binding, five-year commitment of major stakeholders, including the governments of Bangladesh and the United States and some of the largest readymade garment retailers, such as Gap Inc, Wal-Mart Stores Inc and J.C. Penney Company Inc. With the aim of improving safety in RMG supply factories in Bangladesh, the Alliance holds each of its members accountable for its supply firms’ performance in workplace environment development. Most of its programmes are to improve inspection standards, remediation processes and awareness of labourers of the RMG industry in Bangladesh.74 The Accord on Fire and Building Safety in Bangladesh (the Accord) is another body that is trying to build a safe and healthy Bangladeshi RMG industry. It was created through a legally binding five-year agreement between retailers, trade unions and global brands including Adidas, Benetton, Primark and Mango. The Accord aims to build an independent inspection programme and health and safety committees, and improve the capacity of workers to relate to

73 Ministry of Labour and Employment, ‘Steps Taken by Ministry of Labour & Employment and Other Related Stakeholders after Rana Plaza Collapse at Savar’ (2016) http://​mole​.portal​.gov​.bd/​sites/​ default/​files/​files/​mole​.portal​.gov​.bd/​page/​83b1ad06​_b9b4​_4dd4​_97b3​_a5749f81bb29/​steps​-taken​ %20Rana​-Plaza​%2007​%20April​,​%20​%202016​.pdf accessed 24 October 2017. 74 Alliance, ‘About the Alliance for Bangladesh Worker Safety’ (2017) www​.bangladeshworkersafety​ .org/​en/​who​-we​-are/​about​-the​-alliance accessed 23 October 2017.

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Humanising the global supply chain  143 labour management in this industry.75 Recently the Accord decided to extend its operations in Bangladesh for three further years, with the aim to focus more on the development of unionism in this industry. The government and the RMG owners’ association rejected this extension plan and demanded further consultation regarding the extended focus of the programme.76 The RMG labour leaders, however, have welcomed this plan. The Alliance and Accord were established to remedy this situation, but positive change is yet to happen.77 Most of the problems identified in their enlisted factories at the beginning of their operations still remain unsolved. These organisations are fast approaching their agreements’ sunset date, and soon it will be the role of the Department of Inspections for Factories and Establishments (DIFE) to solve these problems. It is doubtful whether DIFE will become ‘an effective enforcement body on par with Accord and Alliance’, as there is no clear indication of this organisation’s capacity to complete such a capital-intensive improvement.78 Any programme for this industry, it is argued by labour union leaders, should have a focus on the development of labour unionism. Labour unionism is a right established by the Bangladeshi Constitution and, according to these leaders, the government and the industry owners should not only allow but also join other stakeholders in implementing this right in the industry.79 With the goal of creating ‘more opportunities for women and men to obtain productive work in conditions of freedom, equity, security and human dignity’, the ILO has conducted a Decent Work Country Programme (DWCP) in Bangladesh for more than 15 years. It is a programme jointly run by the ILO, the Ministry of Labour of the Government of Bangladesh, the Bangladesh Employers’ Federation and the National Coordination Committee for Workers’ Education. This programme is not only relevant to the RMG industry; it provides operational guidance to the stakeholders of the labour market so that stakeholders of that market can ensure sustainable progress regarding major labour issues. This programme focuses more on

Accord, ‘About the Accord’ (2017) http://​bangladeshaccord​.org/​about/​accessed 23 October 2017. Reporter, ‘Accord’s Extension Unexpected’, The Daily Star (2017); Russell M, ‘Bangladesh Accord in Talks on Post-2018 Extension’ (18 November 2016) www​.just​-style​.com/​news/​bangladesh​ -accord​-intalks​-on​-post​-2018​-extension​_id129353​.aspx accessed 8 March 2020. 77 Some groups, including the Clean Clothes Campaign, Maquila Solidarity Network and IndustriALL, repeatedly expressed their dissatisfaction with the performance of these organizations. They even questioned these organizations’ transparency and commitment. For details, see IndustriALL, ‘3 Years On from Rana Plaza, the Bangladesh Accord Is Saving Lives’ (2016) http://​ia​_node​_api​ _upstream/​api/​node/​55088​?lang​=​en accessed 21 April 2016; Miedema C, ‘Alliance for Bangladesh Worker Safety Overstates Progress While Workers’ Lives Remain at Risk’ (2016) https://​cleanclothes​ .org/​news/​press​-releases/​2016/​11/​21/​alliance​-forbangladesh​-worker​-safety​-overstates​-progress​-while​ -workers​-lives​-remain​-atrisk accessed 21 November 2016. 78 Hepburn KJ, ‘Running out of thread: Securing Bangladeshi ready-made garment factory safety given the looming cut-off for the Accord and the Alliance’ (Master of Public Policy, Simon Frasher University 2017); Yasmin T, ‘Unsafe Working Conditions in the RMG Sector of Bangladesh: Role of the International Retailers’ [2014] South Asia Journal 11; Khan MRI and C Wichterich, ‘Safety and Labour Conditions: The Accord and the National Tripartite Plan of Action for the Garment Industry of Bangladesh’ (Global Labour University Working Paper 2015). 79 Article 38 of the Constitution of Bangladesh has granted that the labourers in this country will have freedom of association and the right to join unions. Further to this, Article 14 of this Constitution notes, ‘it should be a fundamental responsibility of the State to emancipate the toiling masses – the peasants and workers – and backward section of the people from all forms of exploitation’. An electronic copy of this constitution is available at www​.ilo​.org/​dyn/​natlex/​docs/​ELECTRONIC/​33095/​73768/​F​-2125404014/​ BGD33095​%20Eng2​.pdf. 75 76

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144  Research handbook on human rights and business the development of the concept of decent work and guiding other stakeholders to proceed with its implementation.80 The Promoting Fundamental Principles and Rights at Work project was directly involved in raising labour conditions in the Bangladesh RMG industry. This two-year project under the guidance of the DWCP was successful in that it provided some training on labour rights and rights for forming labour unions in the RMG supply industry. However, there were some issues related to the representation of true labour leaders in its training programmes. The evaluation report for this project notes that ‘the implementation of some of the capacity building activities was less relevant and not fully adapted to the prevailing conditions and circumstances in Bangladesh … [it] would have been more relevant if it had been better adapted to women’s working environment and social circumstances (life realities) in the RMG industry’.81 The organisation Better Work Bangladesh is involved as part of the ILO’s initiative Improving Working Conditions in the Ready-Made Garment Sector, particularly in relation to the RMG supply industry. Launched in 2013, this organisation provides advisory, assessment and training services to its registered RMG factories. It works with about 120 RMG supply factories and 30 global buyers of RMG products from the Bangladesh RMG supply industry.82 This organisation claims that it has managed to prevent abusive practices, curb excessive overtime and close the gender pay gap in RMG supply industries in different countries. However, research findings on the impact of its programmes are still limited to a number of its own reports amplifying its success. Like the Accord and Alliance, this organisation is still far from covering the full range of RMG supply factories in Bangladesh. Hence, its impact on the RMG supply firms is yet to be significant. It is too early to draw conclusions regarding the performance of the ongoing programmes of Accord, Alliance, and Better Work Bangladesh. They have invested a significant amount of money and time, with the goal of improving workers’ workplace security and training. While it seems they are responsible for some success with these issues in some of their target factories, the scope of these organisations’ programmes remains very narrow. The recent Multifabs Ltd fire that was responsible for the death of 13 workers (and injuries to 50 others) has further explicated that the focus of Accord programmes should expand to cover boiler-related safety issues, lift operations and gas lines.83 Multifabs Ltd is an Accord affiliated RMG factory, and it was regularly inspected by Accord over recent years.84 The factory took some measures according to the suggestions given by the Accord officers, but the boiler remained unsafe for workers and was the main reason for the fatal accident on 3 July 2017. To date, these organisations’ programmes have affected only a small number of factories within the industry and their contribution to raising workers’ dignity and employers’ com-

ILO, ‘Decent Work in Bangladesh’ (2017) www​.ilo​.org/​dhaka/​country/​lang​-​-en/​index​.htm accessed 9 June 2017. 81 International Labour Office, ‘Promoting Fundamental Principles and Rights at Work’ (International Labor Office 2015). 82 Better Work Bangladesh, ‘About Better Work’ (2017) https://​betterwork​.org/​global/​?page​_id​=​ 5581 accessed 23 October 2017. 83 IndustriALL, ‘Statement on the Fatal Explosion at Multifabs Limited Garment Factory in Bangladesh’ (2017) www​.industriall​-union​.org/​statement​-on​-the​-fatal​-explosion​-at​-multifabs​-limited​ -garment​-factory​-in​-bangladesh. 84 The Accord divides its enlisted factories into tiers and provides fire training to the workers of its Tier 1 factories. Multifabs Ltd is one of Accord’s Tier 1 factories. 80

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Humanising the global supply chain  145 mitments to creating a worker friendly environment is meagre. While the aim of Accord is to improve workers’ safety at factory premises, it does not include labour representatives at any stage of its operation. Accord works for only 205 factories and its signatory brands are not bound to pay more than their initial commitment.85 Although Accord covers 1,601 RMG factories, it was only able to complete the remediation process of 46 factories as of mid-October 2016.86 Most importantly, the flagship programmes of these organisations do not have any particular focus on raising minimum wages and bargaining capacity of the workers, which are two of the prerequisites for ensuring a ‘decent work’ environment in this industry. The Bangladesh Labour Act 2006 carries some of the precepts of ‘decent work’. It has affirmed, for instance, that labourers have the right to get extra wages for extra work, maternity leave with payment, weekly holidays and a certificate of appointment. At its inception, it was observed that the effective implementation of its provisions could help the industry meet most of the requirements for ensuring a ‘decent work’ environment for this industry. This has not occurred. In a study conducted in 2010, all respondents affirmed that they work more than eight hours a day, sometimes up to 14 hours a day.87 In the same study, it was found that about one-third of respondents were never told by their employers about the provision for extra payment for overtime.88 In an earlier study, Islam and Deegan describe a notice circulated to the members of the BGMEA stating that they should not use child labour in their factories due to the ‘potentially negative economic effects of being identified as using child labour, and the impact this had on the survival of the industry’.89 This notice did not highlight the fact that children are not meant to work for pay; in fact, that perspective was completely neglected. Also, it has been reported that the workers in the affected section of Multifabs Ltd were asked to return to their stations when they reported the problem with the boiler.90 The management could have stopped operations in this section, taken adequate precautions and checked the boiler carefully. Instead, workers were pushed to continue working. In addition, management blamed the workers for this deadly incident and police filed criminal allegations against ten people, including three workers who died in the incident. None of the factory owners/managers were accused over this incident, although the Additional District Magistrate has pointed out that management knew the boiler’s licence had expired, but continued to use it.91 Further,

85 ‘Two Plans for Safety at Bangladesh Factories’, The New York Times (1 September 2013); Alliance (2015) Alliance Member Agreement www​.bangladeshworkersafety​.org/​files/​Alliance​-Member​ -AgreementFINAL​.pdf accessed 14 March 2015. 86 Accord, ‘Factory Record Status’ (2017) http://​bangladeshaccord​.org/​wp​-content/​uploads/​ Accord​-Public​-DisclosureReport​-1​-February​-2017​.pdf; Hepburn KJ, ‘Running out of thread: Securing Bangladeshi ready-made garment factory safety given the looming cut-off for the Accord and the Alliance’ (Master of Public Policy, Simon Frasher University 2017). 87 Section 100 of the Bangladesh Labour Act 2006 prohibits working for more than eight hours under normal situations and for ten hours including overtime in a day. Also see Hossain I, ‘Rights of women workers in global manufacturing a study of the garments industry in Bangladesh’ (PhD Dissertation, Universita Degli Studi Di Milano 2013). 88 Ibid. According to Section 108 of the Bangladesh Labour Act 2006, the employers are responsible for maintaining a register for overtime and pay double the rate of usual wages to their workers. 89 Islam MA and C Deegan, ‘Motivations for an Organisation within a Developing Country to Report Social Responsibility Information: Evidence from Bangladesh’ (2008) 21(6) Accounting, Auditing & Accountability Journal 850–74, 854. 90 Kormokar S, ‘Multifab Is Accused for Using Unauthorised Boiler’, The Prothom Alo (2017). 91 Prothom Alo, ‘Death toll in Gazipur boiler blast reaches 13’ (4 July 2017).

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146  Research handbook on human rights and business the factory did not have permission to use a boiler. According to Section 23 and 24 of the Boiler Act 1923, this factory had recently been fined around U$285 for using an unauthorised boiler.92 The current wage structure, recent accidents at factory premises and labour unrest suggest that governance in this industry does not consider workers’ lives or livelihoods to be a firm’s social responsibility. Rather, it is considered that workers are assets, and hence strategies related to workers are solely based on cost–benefit analyses designed to generate quick returns.93 Because of this attitude, employers within this industry are less willing to seek ‘new institutional mechanisms to build both industrial relations peace and improved working conditions’.94 As mentioned earlier, the successful implementation of the precepts of decent work depends on sustained commitment from stakeholders as well as the creation of formal institutionalised mechanisms in the market. Some instances of these formal institutions include the free movement of labour, a democratic process in organisations and socio-political support for the dignity of labour. These institutions are absent or undeveloped in the Bangladesh RMG supply industry,95 and to some extent the government is also against their development.96 The Rana Plaza disaster showed that depending mostly on public agencies and factory owners for workers’ wellbeing in this industry is unwise,97 and that the corporate social responsibility movement in weak economies is yet to provide any mechanism capable of building a progressive framework,98 based on the reliable and efficient engagement of social partners.99 Under such circumstances, scholarly evidence and best practice suggests that there should be a mix of agencies and strategies involved in the regulation of ‘decent work’, rather than relying on any

Kormokar S, ‘Multifab Is Accused for Using Unauthorised Boiler’, The Prothom Alo (2017). Majumder PP and A Begum, ‘The Gender Impact of Growth of Export Oriented Manufacturing in Bangladesh: Case Study: Ready-made Garment Industry Bangladesh’ (Bangladesh Institute of Development Studies 2000); Hussain MG, ‘Compliance in RMG Industry of Bangladesh: Social Compliance and Decent Work: The Bangladesh Perspective: Papers and Proceedings of the National Tripartite Meeting on Social Compliance in the RMG Sector’ (Internatonal Labour Organization 2007) 1–49. 94 Grimshaw D and RM Bustillo, ‘Global Comparative Study on Wage Fixing Institutions and Their Impacts in Major Garment Producing Countries (International Labour Organization 2016). 95 Ahmed N and D Nathan, ‘Improving Wages and Working Conditions in the Bangladeshi Garment Sector: The Role of Horizontal and Vertical Relations’ (Capturing the Gains 2014). 96 Van Klaveren M, ‘Wages in Context in the Garment Industry in Asia’ (Wage Indicator Foundation 2016) accessed 18 April 2016. 97 Cairola E, ‘Back to Fundamentals: Organizing, Collective Bargaining and Promotion of a Decent Work Framework in Global Supply Chains’ (2015) 7 International Journal of Labour Research 1–2. 98 Corporate social responsibility (CSR) is a fluid concept. Although this concept has become a strong component of new business and corporate governance models for long term sustainability, it is yet to have an accepted definition. It has four core precepts: societal, economic, environmental and stakeholder. With these precepts, it demands not just a change to the commercial setting in which individual business operates, but also an adequate response of a business to its consumers and societies. For details, see Rahim MM (2013) Legal Regulation of Corporate Social Responsibility: A Meta-regulation Approach of Law for Raising CSR in a Weak Economy (Springer 2013). 99 Locke RM et al, ‘Does Monitoring Improve Labor Standards – Lessons from Nike’ (2007) 61 Industrial & Labor Relations Review 3; Newell P, ‘CSR and the Limits of Capital’ (2008) 39(6) Development and Change 1063–78. 92 93

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Humanising the global supply chain  147 Table 7.1

Approaches in new governance

Dimension

New governance approaches

Participation by

The NG approach mobilises actors (either on their own initiative or in partnership with the state) rather than

stakeholders

relying on government for solutions to public problems.

Use of tools rather

The NG approach emphasises the application of tools by stakeholders. It avoids a reliance on programmes

than programmes

or agencies in which problems of politicisation or recruitment exist. It proposes that the division between policy and administration (as assumed by classical theory) is not working.

Problem solving

The NG approach works with networks and not within a hierarchy. This means that the public problems are

within a system of

not solved by government alone; third parties can become private actors and become engaged. They will

networks

become allies to the public agencies which will lose some control but gain the benefits of the new approach.

Inclusion of private

The NG approach aims to minimise the debate over public versus private. It suggests working with public

actors

and private themes. This will replace competition with collaboration.

Decentralisation of

The NG approach decentralises power by replacing the ‘command and control’ strategy of administration

power

with ‘negotiation and persuasion’. It rejects complete privatisation in the free market and proposes that government is still necessary for the provision of public welfare.

single agency and strategy.100 Adding a new governance approach in this regulation can foster this mix efficiently in the RMG industry in Bangladesh. There is no overarching definition of the new governance (NG). In simple terms, NG means a governance model where all the stakeholders in a given context have the right to use their capacity to jointly reach a public policy goal. Public agencies are integral parts of this model, and it is not based simply on voluntary cooperation among the stakeholders, but rather on a state-facilitated quasi-legal agreement. As such, the characteristics of NG are that it: (i) refers to a set of actors including public agencies; (ii) identifies the gap in governance and recognises the capacities of stakeholders; and (iii) creates a quasi-legal relationship to boost autonomous self-governing networks of actors to reach a public policy goal.101 The table below presents more information on these characteristics and their functions. NG comes from a conceptual background that examines how hardcore corporate decision-making and people-friendly business strategies have begun to converge. It relies on administrative fiduciary duty, stakeholder engagement and economic analysis of management incentives. It also addresses how firms incorporate stakeholder-friendly business strategies and examines the role of shareholders and board activism in pushing for social responsibility. Hence it complements the Sustainable Development Goals (SDGs) introduced in 2015. Goal 8 and Target 8 of the SDGs concerns the need to join the forces of business, governments and

100 Gunningham N et al, Smart Regulation: Designing Environmental Policy (Oxford University Press 1998); Sparrow M, The Regulatory Craft: Controlling Risks, Solving Problems, and Managing Compliance (Brookings Institutional Press 2000); Winter S and PJ May, ‘Motivation for Compliance with Environmental Regulations; (2001) 20(4) Journal of Policy Analysis and Management 675–98; May P, ‘Compliance Motivations: Perspectives of Farmers, Homebuilders, and Marine Facilities’ (2005) 27(2) Law & Policy 317–47; Hutter BM, ‘The Role of Non-State Actors in Regulation’ (Centre for Analysis of Risk and Regulation 2006); Vogel D, ‘The Private Regulation of Global Corporate Conduct Achievements and Limitations’ (2010) 49(1) Business & Society 68–87. 101 Myungsuk L, ‘Conceptualizing the New Governance: A New Institution of Social Coordination’ (Presented at the Institutional Analysis and Development Mini-Conference, 3–5 May 2003, Workshop in Political Theory and Policy Analysis, Indiana University, Bloomington, Indiana, USA); Stoker G, ‘Governance as Theory: Five Propositions’ (1998) 50(1) International Social Science Journal 17–28.

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148  Research handbook on human rights and business workers’ bodies to protect labourers in global supply industries.102 However, the NG approach does not resemble the ILO’s call for a tripartite system of consultations among the constituents and other implementing partners of this industry. Including the new governance approach in any regulatory framework requires quasi- or indirect legal force to set and push the relevant dimensions in stakeholder engagement, whereas tripartite systems are based on the power and influence of parties in a given context. Global buyers/retailers and employers’ bodies prefer to keep a low profile and use their strategies (such as codes of conduct, social audits and accreditations by external private agencies), economic power and social influence to avoid engaging with unions and other social bodies in any tripartite setting. An NG approach fills this gap in governance by mingling the rulemaking power of the government and the strength of stakeholders as well as the private ordering system in a global supply industry.103 Such convergence is vital, as this may assist the industry to create compelling tripartite initiatives like the comparable ‘Memorandum of Understanding’ in the Cambodian RMG industry. Through this quasi-legal step, the Cambodian government binds employers, buyers and union leaders to reach an understanding on a range of issues to build decent industrial relations. Starting in 2011, this understanding has helped the industry to progress the building of trust among employers and workers’ federations, and has reduced the number of strikes in the industry.104 The core of such a mechanism is that it can create a framework agreement which minimises the gaps in the relationship between civil society groups, employers and workers’ bodies,105 and creates scope for everyone to participate in all stages of policy framing and implementation with dignity. Locke and Romis find this legally mandated participatory practice beneficial for maintaining a decent work climate in industries predominantly under private voluntary regulation.106 The ultimate benefit of supplementing labour regulation with the NG approach is that it causes a shift in the mindset of factory owners, global buyers/retailers and public agencies: a worker is not a ‘fixed cost’ and consideration for the wellbeing of workers is not only related to increased productivity. Adding this approach to labour regulation in the Bangladesh RMG industry may not provide immediate gains, but it will assist the industry to gradually reduce the labour agitation experienced and build a decent work environment. From a developing country perspective, monitoring the internal regulation of firms is difficult – mainly when the government agencies involved are highly corrupt,107 and do not have adequate political support for a focus on the wellbeing of workers, in comparison to the quick 102 Sustainability Development Goals, commonly known as Global Goals, are an inclusive agenda to put the world ‘on a more prosperous and sustainable development path’ through eradication of poverty by 2030. There are 17 goals. For details of the SDGs, visit www​.undp​.org/​content/​undp/​en/​home/​ sustainable​-development​-goals​.html. 103 Kolben K, ‘Transnational Labor Regulation and the Limits of Governance’ (2011) 12(2) Theoretical Inquiries in Law 403–37. 104 Reeve M and HS Hwang, ‘Cambodian Industrial Relations’ (International Labour Organization 2015) 30. 105 Wright CF and W Brown, The Emergence of Socially Sustainable Sourcing: A Mechanism for Protecting Labour Standards in the Context of Collective Bargaining Decline, in Resocialising Europe in a Time of Crisis, eds N Countouris and M Freedland (Cambridge University Press 2013) 426–46. 106 Locke R and M Romis, ‘Beyond Corporate Codes of Conduct: Work Organization and Labor Standards in Two Mexican Garment Factories’ (MIT Sloan Working Paper 2006). 107 The perceived level of corruption of the public sector in Bangladesh scored 26 out of 100, where 0 is highly corrupt and 100 is most clean. For details, see www​.transparency​.org/​country/​BGD accessed 20 October 2017.

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Humanising the global supply chain  149 expansion of labour-based global supply industries.108 Hence the labour regulation of this industry remains largely with foreign profitseeking organisations.109 A political commitment to inserting the NG approach into labour regulation in this industry may assist in mitigating this problem, as the application of this approach in labour administration can combine various agencies to overcome the drawbacks raised by public and private regulation and governmental agencies.

5. CONCLUSION The aim of this chapter was not to investigate the opportunities and challenges of the global policies and initiatives to secure labour rights in global supply chains. Instead it aimed to investigate the progress of attempts to build a ‘decent work’ environment within the supply industry in labour intensive developing and least developed countries, using the Bangladesh RMG industry as a case study. The chapter briefly discussed the precepts of ‘decent work’ and the buyer-driven global supply chain framework. It also provided a note on the Bangladesh RMG supply industry and assessed the exercise of three labour rights in this industry: wage equity, freedom of association and safety at work. While the protection of these three labour rights is vital for the creation of a decent work environment, this assessment revealed that: (a) workers in this industry not only receive the lowest wages set against comparable RMG industries around the world, but also lack a sustained mechanism for ensuring a regular increase of minimum wage and wage compliance; (b) the government and employers in this industry are less supportive of the collective empowerment of labourers and there is therefore a lack of the adequate formal labour unions necessary for protecting wage equity, workers’ dignity and wellbeing; and (c) the existing programmes for raising RMG worker safety cover a negligible portion of the factories in this industry and lack broad scope and adequate resources. In the discussion pertaining to the potential strategies this industry can consider to create a sustainable ‘decent work’ environment, this chapter highlighted the lack of sustained commitment from government, employers and global buyers/retailers to build the institutions necessary to progress workers’ wellbeing. The government is keen to expand labour-intensive industries but less interested in raising the quality of workers’ lives. The legislation related to workers’ wellbeing is far from exhaustive; employers in this industry still consider their workers as a ‘fixed cost’, exploiting them in the knowledge that the workers do not have strong unions. In this industry, global buyers/retailers are more interested in quick delivery, and the government agencies responsible for protecting workers’ rights are corrupt, inefficient or inadequate. The discussion also highlighted the need for this industry to institutionalise some mechanisms to develop active socio-political dimensions in labour administration.

108 Rahman Z and T Longford, Why Labour Unions Have Failed Bangladesh’s Garment Workers, in Labour in the Global South: Challenges and Alternatives for Workers, S Mosoetsa and M Williams eds (International Labour Organization 2012) 87–106. 109 Hepburn KJ, ‘Running out of thread: Securing Bangladeshi ready-made garment factory safety given the looming cut-off for the Accord and the Alliance’ (Master of Public Policy, Simon Frasher University 2017).

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150  Research handbook on human rights and business The chapter also argued that sustainable progress towards the creation of a decent work environment depends on the dedication and efforts of the constituents of this industry to upgrade the social dimension, where the principal actors design a tailor-made policy and join the social partners to progress the relevant policy with appropriate strategies. To this end, it suggested that the labour relation regulation for the RMG industry include the ‘new governance’ approach. This governance approach is backed by the rule-making power of the sovereign authority and can effectively encourage key stakeholders to depend on each other and work together on strategies designed to reach a common objective. Including this approach as part of the labour relations in the Bangladesh RMG industry may progress the creation of a ‘decent work’ environment by raising trust among stakeholders, securing sustained commitment of the principal actors and creating socio-political dimensions in labour relations. Further research regarding progress on the creation of a decent work environment through a new governance approach in labour regulation in the global supply industry would be valuable.

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8. Human rights due diligence and extractive industries Daniela Chimisso dos Santos and Sara L. Seck

1. INTRODUCTION Extractive industries, including mining, oil and gas, and coal, are frequently implicated in human rights violations all over the world. Well-known examples include Shell in Nigeria,1 Talisman in the Sudan,2 Texaco/Chevron in Ecuador,3 and Barrick Gold in Papua New Guinea.4 These examples highlight a wide range of human rights violations committed by powerful corporate actors, including state-owned enterprises,5 active in the developing world. Allegations associated with these cases range from complicity in egregious violations of international criminal and humanitarian law norms to violations of indigenous and local community environmental rights, as well as sexual violence perpetrated by security forces. Smaller extractive companies active in both the global north and the global south are equally implicated in rights violations, perhaps especially at the exploration stage. Less often considered, but crucially important, is the pressing problem of human rights violations arising from climate change that is a consequence of cumulative greenhouse gas emissions that are the product of the fossil fuels extracted by the oil, gas and coal industries. As a response to both negative publicity and company failures to obtain an anticipated social licence to operate, extractive companies and their industry associations, as well as home state governments and international organisations, have been actively promoting human rights due diligence (HRDD) tools to prevent and even remedy certain rights violations. This chapter will examine the HRDD tools and their implementation in the extractives sector.

Amnesty International, ‘A Criminal Enterprise? Shell’s Involvement in Human Rights Violations in Nigeria in the 1990s’ (2017) accessed 14 January 2019. 2 Business and Human Rights Centre, ‘Talisman lawsuit (re Sudan)’ accessed 19 January 2019; Penelope Simons and Audrey Macklin, The Governance Gap: Extractive Industries, Human Rights, and the Home State Advantage (Routledge 2014). 3 Business and Human Rights Centre, ‘Texaco/Chevron lawsuits (re Ecuador)’ accessed 2 April 2020. 4 Business and Human Rights Centre, ‘Papua New Guinea Women and Barrick Gold Settle Claims of Sexual Assault and Violence at Porgera Mine’ accessed 19 January 2019. 5 For example, Shell Nigeria’s investments are undertaken through its subsidiary Shell Petroleum Development Company of Nigeria, which is a joint venture with the Nigerian National Petroleum Corporation, a Nigerian state owned enterprise; Talisman’s investments in Sudan was through a consortium, which included the Sudan National Petroleum Corporation. 1

151 Daniela Chimisso and Sara L. Seck - 9781786436405

152  Research handbook on human rights and business The chapter is structured as follows. First, the wide-ranging nature of human rights violations associated with extractive industries will be detailed, drawing upon select case studies. Second, the chapter will examine implementation of HRDD with reference to risk assessment tools promoted to, and implemented by, extractive companies, including human rights impact assessment (HRIA) tools, and environmental and social risk assessment. Third, the chapter will consider the limitations of current practices, including the overly business-centric nature of HRDD, timing issues, and lacunas with regard to environmental rights, gender equality and climate change.

2.

HUMAN RIGHTS VIOLATIONS AND EXTRACTIVE INDUSTRIES

Historically, the extractive industries have had an egregious human rights record. The extractive industries have been alleged to have violated the right to self-determination; the right to life; the right not to be subjected to inhuman and/or degrading treatment; the right not to be subjected to slavery, servitude or forced labour; the right to liberty and security of the person; the right to freedom of assembly and the right to freedom of association; the right to health; the human rights of indigenous peoples; and the right to a healthy environment, to name but a few. In our exploration of human rights due diligence and the extractive industries, we will first compare the petroleum and the mining industries. We will then examine two examples of human rights due diligence in the extractive industries. 2.1

Extractive Industries Reviewed

The business of extracting non-renewable natural sources is characterized by a number of common features. These include long-term time frames, capital-intensive development and a high risk–reward balance.6 Furthermore, the petroleum and mineral industries both have significant political profile, which can be of such magnitude that they are of national security interest.7 The enclave characteristic of projects arising from their location in far-flung places in the interior, or even offshore (in the cases of both oil and gas), results in few linkages with the rest of the economy and the remainder of the population.8 Unlike other industries, the extractive business has limited jurisdictional choice as location is based on product/ore discoveries. Furthermore, as a corollary to large capital investments, the host country ‘captures’ the industry over time, as a shift in power relations between the host country and business occurs once commercial discoveries are declared and/or operations begin. The petroleum and mining industries are shaped in part by the volatility of commodity, mineral and metal prices. The unpredictability of prices aggravates the instability of costs

Peter D Cameron and Michael C Stanley, Oil, Gas and Mining: A Sourcebook for Understanding the Extractive Industries (World Bank Group 2017) 40–46. 7 The use of mineral projects as nationbuilding is explored by Sara L Jackson, ‘Imagining the Mineral Nation: Contested Nation-building in Mongolia’ (2015) 43(3) Nationalities Papers 437. 8 World Bank Group (n 6) 40–46. 6

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Human rights due diligence and extractive industries  153 and rents, which in many cases may be substantial.9 Furthermore, for host states with fragile or weak institutional environments, the magnitude of certain projects and the large influx of foreign direct investment can exacerbate the lack of diversification of rents, and the abuse of local communities by oligarchical institutional structures.10 However, the petroleum and mining industries have several significant differences, and within each industry there are further variances – for example, between conventional (deposits found in discrete accumulations or pools) and unconventional (deposits exploited through horizontal well bores, for example, shale gas or fracking) hydrocarbons.11 In mining, the main differences are: small volume, high-value products such as gemstones, gold and platinum group of metals (smaller footprint, shorter life of mines); high volume, low value industrial minerals, such as coal, iron ore, copper, nickel, and tin; and artisanal mining12 (larger footprint, longer life of mines).13 We propose that there are three main differences between the extractive industries that impact HRDD. The first is the degree of each sector’s environmental and social footprint.14 Not only does the type of extractive method affect the footprint (for example, open-pit mining versus drilling), but so does the location of the resources, such as offshore oil and gas extraction versus in-land mining extraction.15 Furthermore, the degree of the footprint can also be differentiated by the transportation of the product from site to market, that is, whether the product is transported through pipelines, rail and/or shipping. The second difference between the petroleum and mining industries is how the exploration phase is undertaken and financed.16 Two important differences in this area are the amount of capital and the operating costs required during the exploration phase in the petroleum industry, versus that required by junior mining companies and prospectors. The financial structure of the mining sector value chain is such that prospectors and junior companies which have no mining operations have access to limited funds, as they are neither producing companies nor recipients of income from production or from another operating business enterprise.17 A junior will commonly only hold one or two exploration assets, and due to the high percentage of failed projects, juniors are cash sinkholes and are financed either through the raising of equity

ibid. ibid; World Bank Group, ‘Striking a Better Balance: The World Bank Group and Extractive Industries’ (2004) 42 accessed 19 January 2019. 11 See for example the distinction made by the Government of British Colombia, Canada, between the two types of hydrocarbons. Ministry of Natural Gas Development and Minister Responsible for Housing, accessed 19 January 2019. 12 While artisanal mining is an important source of livelihood for many people around the world, due to its specificity, we have not included it in our analysis. 13 World Bank Group (n 6). 14 ibid. 15 ibid. 16 ibid. 17 Motoko Aizawa et al, ‘Financing Human Rights Due Diligence in Mining Projects’ in S Lodhia (ed) Mining and Sustainable Development: Current Issues (Routledge, 2018) [Aizawa] 108. 9

10

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154  Research handbook on human rights and business or through joint ventures with earn-in options.18 In contrast, the oil and gas industry requires a much higher capital cost than mining at the exploration phase.19 The lack of available financing for juniors contributes to a failure to address social/human rights problems at the front end of exploration. The third and final difference is the varied nature of the mining industry versus the concentrated and relatively homogenous product of the hydrocarbons industry.20 The fragmented characteristic of the mining industry results in large differences between corporations that are leaders in social, environmental and human rights aspects versus laggards. The more homogenous nature of the hydrocarbons industry to some extent mitigates such discrepancy. Regardless of their differences, the harms that both industries can bring to bear on people and the environment are significant. 2.2

Human Rights Due Diligence

The basket of management tools that identify, assess and mitigate the risk of activities in extractive activities has been in continuous evolution for the past 50 years, with increased use of environmental impact assessments and, more recently, social impact assessments. HRDD arose as a risk management process in 2011 when the UN Human Rights Council unanimously endorsed the UN Guiding Principles on Business and Human Rights (UNGPs). The ‘protect, respect and remedy’ framework of the UNGPs provides for a role for HRDD in both the host state’s obligations to protect and the businesses’ obligations to respect.21 From a host country perspective, the UNGPs encourage the legislating of HRDD in circumstances ‘where the nature of business or operating contexts pose significant risk to human rights’.22 Furthermore, such legislative endeavour should apply also to state-owned or controlled business enterprises, including export credit agencies and official investment and insurance or guarantee agencies.23 Within businesses’ obligations to respect human rights, the UNDPs detail the contents of HRDD. Four major steps are described: the identification and assessment of actual and potential human rights impacts, integrating and acting upon findings, tracking responses and communicating how the impacts are to be addressed.24 There has been a proliferation of tools, processes and procedures created by international organizations and industry to put HRDD into practice. For this chapter, we use the designation HRDD as an umbrella term that encompasses several risk assessment tools, including human

Casey Iddon et al, ‘Junior Mining Sector Capital-raising: The Effect of Information Asymmetry and Uncertainty Issues’ (2013) 15(3) Journal of Applied Business & Economics 56; see Aizawa (n 17) 108, 109. 19 World Bank Group (n 6). 20 ibid. 21 UN Human Rights Office of the High Commissioner UN Guiding Principles on Business and Human Rights (UNGP 2011) Principle 17 accessed 19 January 2019. 22 ibid, Principle 7. 23 ibid, Principle 4. 24 ibid, Principle 17. 18

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Human rights due diligence and extractive industries  155 rights impact assessments (HRIA), human rights risk assessments and human rights compliance assessments.25 2.3

Examples of HRDD and the Extractive Industries

In order to better explore HRDD and the extractive industries, we bring forward two case studies that highlight several functions of HRDD. First, Nevsun Resources Ltd (Nevsun case) highlights that HRDD may serve as a tool to mitigate legal risk, while not actually preventing harm. The second case study, Pacific Exploration and Production Ltd (Pacific E&P case), reveals that HRDD can be and are undertaken by communities, not only businesses. Furthermore, it highlights the importance of effective remedy processes for human rights violations. 2.3.1 Nevsun Case A recent example of human rights violations in the mining industry arises from the allegations against Nevsun Resources Ltd, a Canadian mining company, made by three refugees from the State of Eritrea, in East Africa, where the company developed a gold mine (the Bisha mine).26 The local project company is a joint venture between the Canadian company, which holds a 60 per cent interest, and the State of Eritrea, through its national mining company (ENAMCO), which owns the remaining 40 per cent.27 The Bisha mine generated $700 million in profits in its first four years of operation.28 In a lawsuit filed in 2014 in British Columbia, Canada, the plaintiffs claim that the company was complicit in the use of forced labour; torture; slavery; cruel, inhuman or degrading treatment; and crimes against humanity.29 The allegations include that the company knew or ought to have known that the national construction companies, which had been hired by either the parent company or the local project company, had engaged in conduct against the workers which included beatings, being made to roll or run in hot sand, being bound with their hands and feet tied together behind their backs and being left in the hot sun for prolonged periods of time.30 The Bisha mine finalized an HRIA in April 2014, and an HRIA audit report was released in 2017.31 The methodology used was that set out by the Danish Institute for Human Rights and Rights & Democracy.32 According to the report, extensive stakeholder engagement was under The Dutch Organization Aim for Human Rights ‘Guide to Corporate Human Rights Impact Assessment Tool’ defines each of these risk tools separately. See Aim for Human Rights, accessed 19 January 2018 [AIM] 12; Aizawa (n 17) 101. 26 Arya v Nevsun Resources Ltd [2016] BSSC 1856. 27 Nevsun Resources Ltd accessed 19 January 2019. 28 The Fifth Estate, ‘Canadian Broadcasting Corporation’ (12 February 2016) accessed 19 January 2019. 29 Arya v Nevsun Resources Ltd (n 26) para 43. 30 ibid, para 46. 31 LKL International Consulting Inc, ‘Human Rights Impact Assessment of the Bisha Mine in Eritrea – 2015 Audit’ (commissioned by Nevsun Resources Ltd and Eritrean National Mining Corporation (ENAMCO)) acc-​ essed 7 February 2019. 32 ibid, 14. 25

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156  Research handbook on human rights and business taken, including with affected stakeholders in Eritrea, such as the Bisha workers,33 community members,34 representatives of the government and contract workers and suppliers,35 as well as with international stakeholders outside of Eritrea.36 At the same time a UN Human Rights Counsel Commission of Inquiry on Human Rights in Eritrea was installed due to allegations of human rights abuses by the Eritrean government.37 The Commission issued reports in 2015 and 2016.38 The final report, dated May 2016, found that there were reasonable grounds to believe that ‘crimes against humanity, namely enslavement, imprisonment, enforced disappearance, torture, other inhuman acts, persecution, rape and murder had been committed in Eritrea since 1991’.39 The Commission recommended that the UN Security Council refer the situation in Eritrea to the Prosecutor of the International Criminal Court for consideration.40 Interestingly, the CEO of Nevsun claimed that despite Nevsun’s attempt to engage with the Commission, it chose not to engage with the company and ‘verify any basic facts or allegations or to report on the Company’s independent human rights assessment’.41 In November 2017, the British Columbia Court of Appeal dismissed an appeal by the company to have the case moved to a court in Eritrea.42 However, the case was appealed to the Supreme Court of Canada, which determined in a split decision that the action could continue as the Act of State doctrine is not part of Canadian common law, and it was not plain and obvious that claims based on violations of customary international law would fail at trial.43 In this case, the HRIA may have failed to prevent human rights violations for Eritrean workers. Furthermore, the case shows the importance of the timeliness of HRDD, as in this case the risk assessment was done too late. 2.3.2 Pacific E&P Case In the petroleum industry, a recent case involves a Canadian company, Pacific Exploration & Production (Pacific E&P), with investments in Colombia. Allegations against Pacific E&P are of labour violations, egregious environmental damage and negative impacts to the survival of local indigenous communities.44 33 Workers in mining and processing, in office and administration, in kitchen and housekeeping, male and female worker focus groups: ibid, 13. 34 Traditional leaders, women in leadership roles, doctors in community health clinics, workers from nearby communities, and community liaison officers: ibid, 13. 35 Workers of both construction companies working on site (Segen and Transhorn): ibid, 13. 36 Including the Canadian Parliament’s Subcommittee on International Human Rights, UNICEF (Canada), Amnesty International and Mining Watch: ibid, 14. 37 UNHRC, Report of the Commission of Inquiry on Human Rights in Eritrea (A/HRC/32/47, 9 May 2016). 38 ibid. 39 ibid. 40 ibid. 41 Nevsun Provides Update on Human Rights, Newswire (17 June 2015) accessed 19 January 2019. 42 Araya v Nevsun Resource, 2017 BCCA 401. 43 Nevsun Resources Ltd. v Araya [2020] SCC 5. 44 Elizabeth McSheffrey, ‘Canadian Petroleum Giant Accused of Environmental, Human Rights Abuses in Colombia’ (National Observer 12 July 2016) accessed 19 January 2019.

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Human rights due diligence and extractive industries  157 In March 2016 the Environmental, Agrarian and Community of Rubiales Committee, represented by the then leader of the Labour Union (Unión Sindical Obrera), Mr Héctor Sánchez Gómez, brought a class action against Pacific E&P, Ecopetrol, the Ministry of Mines and Energy and the Ministry for the Environment.45 The claim alleged egregious environmental damage caused by the high incidence of seismic activity at the Campo Rubiales since April 2011 because of the high volumes of water injection in the process of petroleum extraction.46 In 2016, the HRIA report that had been commissioned by the affected stakeholders of the petroleum industry in Puerto Gaitán, located in Meta, Colombia, and focusing on the activities of Pacific E&P, was published.47 The report concluded that labour rights violations included breaches of the right to free association and the right to unionize, and illegal third party contracting.48 It confirmed environmental damage due to the increased seismic activity in the area resulting from water injection, and also confirmed loss of biodiversity and water contamination.49 Moreover, the assessment concluded that the company and the state did not protect the right of indigenous peoples to free, prior and informed consent (FPIC). The report claimed that there were irregularities surrounding the process of FPIC, including a lack of information on the impact of the project, a lack of mitigation endeavours on environmental impacts and a lack of technical assistance from the state to the indigenous communities.50 Regardless of the above claims, Pacific E&P received funding from Export Development Canada, the Canadian Crown export credit corporation, in 2014 and 2016.51 Furthermore, Pacific E&P subsequently underwent insolvency proceedings, and has now rebranded itself as Frontera Energy and handed over the Colombian operations to the Colombian state company, Ecopetrol.52 This development raises the issue of which corporate entity, if any, will bear the costs of any remedies. This case illustrates the use of HRIA by community members instead of the corporation, and its use as a methodology for determining current impacts and damages. It also highlights

CIDH ordena al Estado colombiano proteger a defense amenazado en Puerto Gaitan, Colectivo de Abogados (9 February 2017) accessed 19 January 2019. 46 ibid. The Inter-American Human Rights Commission has ordered precautionary measures to be undertaken by the Government of Colombia to protect the life, personal integrity, individual and collective rights of Mr. Gómez against threats, hostilities and persecution. 47 International Federation for Human Rights, Colombia – El costo humano del petroleo: Estudio de impacto en los derechos humanos de las actividades de Pacific Exploration & Production Corp. en Puerto Gaitán’ (July 2016) No. 677e accessed 19 January 2018. 48 ibid, 58. 49 ibid, 50–57. 50 ibid, 60. 51 Elizabeth McSheffrey, ‘Canadian Petroleum Giant Accused of Environmental, Human Rights Abuses in Colombia (National Observer 12 July 2016) accessed 19 January 2019 [McSheffrey]; Correspondence from Above Ground, FIDH, Colectivo de Abogados, and Project for Accompaniment and Solidarity International, to Ms. Catherine Decaries, Government of Canada – Corporate Affairs – EDC (14 June 2017) ‘Query regarding EDC’s support to Ecopetrol and Pacific E&P’ accessed 19 January 2019. 52 McSheffrey (n 51). 45

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158  Research handbook on human rights and business the challenge to access to remedy for human rights violations that is created by shifting corporate identity.

3.

IMPLEMENTATION OF HRDD

Implementation of HRDD by extractive companies may be the result of an independent company-led initiative or a community-led initiative, as illustrated above, or it may be required or encouraged by multilateral organizations, including financial institutions and industry organizations. Alternately, HRDD may be promoted to extractive companies by home or host state governments. This part will examine a range of initiatives designed to encourage implementation of HRDD by extractive companies. 3.1

Multilateral Organizations

3.1.1 International Finance Corporation The International Finance Corporation (IFC), which is the private sector branch of the World Bank, has been a leader in establishing environmental and social standards that are used in project finance. Performance Standards on Environmental and Social Sustainability include a mention of human rights in Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts (PS 1). The introductory PS 1 reiterates the need for businesses to respect human rights, and states that each of the Performance Standards have a human rights dimension to them. It also highlights due diligence as a tool to address human rights issues in projects.53 Moreover, in a footnote, PS 1 highlights that in ‘limited high risk circumstances’ it may be appropriate to undertake specific human rights due diligence.54 In Performance Standard 4: Community Health, Safety and Security, the objectives include reference to the safeguarding of personnel and property carried out in accordance with relevant human rights principles and in a manner that avoids or minimizes risk to the ‘affected communities’.55 Furthermore, in Performance Standard 7: Indigenous Peoples, an objective of the standard is ‘to ensure that the development process fosters full respect for the human rights, dignity, aspirations, culture, and natural resource-based livelihoods of indigenous peoples’.56 In 2010 the IFC, in collaboration with the International Business Leaders Forum and in association with the UN Global Compact, issued a Guide to Human Rights Impact Assessment

53 IFC Performance Standard 1: ‘Assessment and Management of Environmental and Social Risks and Impacts’ (1 January 2012) accessed 19 March 2019. 54 ibid. 55 IFC Performance Standard 4: ‘Community Health, Safety and Security’ (1 January 2012) 1 accessed 19 January 2019. 56 IFC Performance Standard 7: ‘Indigenous Peoples’ (1 January 2012) 1 accessed 19 January 2019.

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Human rights due diligence and extractive industries  159 and Management (HRIAM).57 The ‘how to’ guide’s goal is to assist companies in identifying potential and existing human rights risks, assessing potential and or existing human rights impacts and integrating such findings into the company’s management system.58 The guide does not take a position on whether HRIA should be undertaken as a standalone due diligence process or whether it should be integrated within other management processes. Following the process set out in the UNGP but breaking it down into seven steps, HRIAM calls for the initial preparation by the company to determine the right approach to HRDD for itself. Then, HRIAM calls for identification, engagement, assessment, mitigation, management and evaluation of the possible and perceivable human rights impacts.59 HRIAM created two interactive tools: a human rights identification tool, and human rights due diligence mapping tools. Furthermore, fictitious human rights scenarios are used in order to assist the company in explaining to companies the complexity of social and economic situations that have a potential impact on human rights.60 Scenarios for 12 industry sectors were prepared, including for the mining and the oil and gas industries. The scenarios dedicated to the extractive industries (two separate scenarios for mining and oil and gas) are about a foreign company, in the midst of a merger with a national extractives company, confronted by NGOs and the media with evidence of human rights violations by the national companies.61 The scenarios work through a two-step process: a human rights identification exercise that maps the allegations to the human right and the foundational international instrument for that right; and the mapping of the allegations to the human right and the company’s policies, assessment procedures and management systems.62 Furthermore, the IFC has a number of environmental, health and safety (EHS) guidelines dedicated to specific areas of the extractive industries, for example, the EHS Guidelines for Liquefied Natural Gas Facilities,63 EHS Guidelines for Petroleum Refining,64 and EHS Guidelines for Offshore Oil and Gas Development.65 However, neither human rights nor HRDD are mentioned in any of these guidelines. Moreover, the IFC has a stakeholder engagement handbook, developed in 2007, that provides guidance for companies doing business in emerging markets.66 The handbook identifies

Desiree Abrahams and Yann Wyss, Guide to Human Rights Impact Assessment and Management (HRIAM) (2010) accessed 19 January 2019. 58 ibid, 6. 59 ibid, 6. 60 ibid, 15. 61 ibid, 85 (mining) and 93 (oil and gas). 62 ibid. 63 IFC, EHS Guidelines for Liquified Natural Gas Facilities, accessed 19 January 2019. 64 IFC, EHS Guidelines for Petroleum Refining, accessed 19 January 2019. 65 IFC EHS Guidelines for Offshore Oil and Gas Development, accessed 19 January 2019. 66 IFC, ‘Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets’ (2007) [IFC Engagement]. accessed 19 January 2019. 67 ibid, Indigenous Peoples consultation at p.47, and gender considerations at p.56. 68 OECD, ‘Directorate for Financial and Enterprise Affairs’ (Guidelines for Multinational Enterprises 2011) Chapter 11, para A2. 69 ibid, 31. 70 OECD, ‘OECD Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractive Sector’ (2017) accessed 19 January 2019. 71 ibid, 10. 72 ibid. 73 ibid, 17. The issues that are covered in the guidance include ‘disclosure, human rights, employment and industrial relations, environment, combating bribery, bribe solicitation and extortion, and consumer interests’.

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Human rights due diligence and extractive industries  161 The guidelines focus on ‘risk-based’ due diligence, that is, the nature and extent of the process is dependent on the risk of adverse impacts related to a project. All enterprises should conduct due diligence, even though those where projects have a minimal risk can scale back the depth and breadth of the process HRDD. Main components of ‘meaningful stakeholder engagement’ include: ●● Two-way engagement, including sharing of decision-making power, thus moving away from the company as sole decision-maker to a more mutual process of decision-making between the interested and affected parties. ●● ‘Good faith’ engagement depends on all participants, and it means that engagement is done with the genuine intention to understand interests. ●● Responsive engagement is when there is follow-through on engagement efforts, ensuring that adverse impacts are appropriate addressed, including adequate remedies. ●● Ongoing engagement means that the engagement continues throughout the lifetime of the project.74 The focus of the OECD Guidelines on stakeholder engagement is divided into two parts: (i) expectation of the conduct of a responsible business; (ii) identifying and avoiding potential adverse impacts. Thus, stakeholder engagement is defined as an important means of implementing due diligence.75 Different forms of engagement are highlighted, and they include informing/ reporting, consulting, negotiating (with the objective of coming to a shared agreement) and responding. The Guidelines recommend due diligence systems and processes to ensure stakeholder engagement activities. As with due diligence, it should be proportional to the risk and impacts. The Guidelines recognize individual as well as collective human rights.76 The OECD has also issued Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas.77 The Guidance was developed through a multistakeholder process with OECD members, 11 countries of the International Conference on Great Lakes Region, industry, civil society and the UN Group of Experts on the Democratic Republic of Congo. The Guidance defines conflict-affected and high-risk areas as those where the presence of armed conflict, widespread violence or other risks of harm to people have been identified.78 The due diligence process is set out in a five step framework: to establish strong company management systems, identify and assess risk in the supply chain, design and implement a strategy to respond to identified risks, carry out independent third party audit of supply chain due diligence at identified points in the supply chain and report on supply chain due diligence.79

ibid, 18. ibid, 18. 76 ibid, 20. 77 OECD, ‘Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas’ (2016) accessed 19 January 2019. 78 ibid, 13. 79 ibid, 17–19. 74 75

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162  Research handbook on human rights and business In 2018, the OECD issued Due Diligence Guidance for Responsible Business Conduct (OECD RBC).80 This guide is to support businesses in their implementation of the Guidelines for Multinational Enterprises and is specific neither to extractives nor to human rights risk. Rather, the OECD RBC was issued to support businesses in their efforts to minimize adverse impacts to ‘workers, human rights, the environment, bribery, consumers and corporate governance’ with regard to their operations, supply chains and other business relationships.81 3.2

Industry Organizations

Industry organizations have also made numerous efforts in assisting their members in the implementation of HRDD. 3.2.1 International Council on Mining and Metals The International Council on Mining and Metals (ICMM) is an international organization comprising 24 mining and metals companies. ICMM’s mandate is to strengthen environmental and social performance, as well as enhance mining’s contribution to society.82 ICMM has provided guidance on human rights risk guidance to its members since 2003.83 Three guidance documents have been published by the organization: Human Rights in the Metals and Mining Industry: Overview, Management Approach and Issues; a guidance document on handling local issues called Human Rights in the Metal and Mining Industry: Handling and Resolving Local Level Concerns & Grievances; and a third document published in 2012, Human Rights in the Mining and Metals Industry: Integrating Human Rights Due Diligence into Corporate Risk Management Processes (ICMM HRDD).84 The last of these documents incorporates the UNGP recommendations, and its goal is to assist mining companies to build on existing risk management processes such as ESIAs, as well as assist in determining how to choose among the most useful tools and when to use them.85 ICMM HRDD recommends that it is preferable to integrate HRDD into the company’s internal control system, rather than conducting it through standalone processes.86 Interestingly, ICMM explains due diligence as first a process of building internal awareness and understanding of where a company’s activities may have the potential to intersect or infringe human rights, and then a process of prevention and mitigation.87 The focus of the ICMM HRDD guide is on the initial impact assessment step, rather than the other three steps set out by the UNGP.88 The position of ICMM is that the other documents 80 OECD Due Diligence Guidance for Responsible Business Conduct accessed 19 January 2019. 81 Ibid. 82 International Council on Mining and Metals (ICMM) accessed 19 January 2019. 83 ibid; Aizawa (n 17). 84 ICMM, ‘Human Rights in the Mining and Metals Industry: Integrating Human Rights Due Diligence into Corporate Risk Management Processes’ (2012) accessed 19 January 2019 [ICMM HR]. 85 ibid. 86 ibid, 7. 87 ibid, 8. 88 ibid, 8.

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Human rights due diligence and extractive industries  163 already partially cover the remaining UNGP steps. Contrary to the work undertaken by the OECD, ICMM does not focus on stakeholder engagement; instead it directs its members to IFC’s Stakeholder Engagement Handbook,89 as well as ICMM’s Community Development Toolkit.90 ICMM’s Community Development Toolkit sets out 20 tools for community development, coupled with step by step guidance. The tools are clustered into five groups: relationship, planning, assessment, management, and monitoring and evaluation tools.91 The Toolkit provides when to begin to use the tool, when it should be fully implemented and when it should be updated.92 The Toolkit draws upon the UNGP and includes human rights considerations.93 3.2.2 IPIECA IPIECA is a global oil and gas industry association,94 whose goal is to share and promote good practice and knowledge for the improvement of environmental and social performance.95 In November 2012, IPIECA published Human Rights Due Diligence Process: A Practical Guide to Implementation for Oil and Gas Companies.96 The IPIECA Guide encourages building on existing management systems, and already established roles and responsibilities, standards, processes, training, guidance and tools within an organization.97 The HRDD is broken down into seven steps. The first is the vision/ objective for managing human rights and the creation of formal policies. The remaining six steps are: determining accountability within the organization; assessing and planning, which includes evaluating the processes that already exist within the organization; implementation of the management plan; reviewing the indicators and performance indices; and improving the process through reviews.98 Interestingly, the Guide limits the human rights areas that are relevant to the industry to four: workers, community, security provision and business relationships/ contractors.99 In 2014 IPIECA issued the third edition of its Human Rights Training Tool.100 The tool is set up as a PowerPoint presentation that can be modified by following the instructions provided therein and is to be used directly as a training tool throughout the organization.101 The third edition adds modules dedicated to labour issues, including freedom of association

IFC Engagement (n 66). ICMM HR (n 84) 8. 91 ICMM, ‘Community Development Toolkit’, 9 accessed 19 January 2019. 92 ibid, 10. 93 ibid, 127. 94 IPIECA, accessed 19 January 2019. 95 ibid. 96 IPIECA, ‘Human Rights Due Diligence Process: A Practical Guide to Implementation for Oil and Gas Companies’ (2012) accessed 19 January 2019. 97 ibid, 4. 98 ibid, 4. 99 ibid, 5. 100 IPIECA Human Rights Training Tool (2014) accessed 19 January 2019. 101 ibid. 89 90

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164  Research handbook on human rights and business and collective bargaining, child labour, forced labour, human trafficking and elimination of discrimination in respect of employment and occupation.102 3.3

Home and Host States

There are an increasing number of initiatives led by both home and host states that are designed to encourage, if not require, extractive companies to undertake human rights due diligence. Some of these HRDD initiatives are targeted at all companies, irrespective of industry sector, although they may limit their application to companies over a certain size.103 Other initiatives are targeted explicitly at extractive sector companies, yet are not explicitly linked to a requirement to implement HRDD.104 This section of the chapter will briefly consider a small number of initiatives that are specifically designed to encourage, if not require, extractive companies to undertake HRDD. An example of host country action on human rights due diligence is seen in the Democratic Republic of Congo (DRC). The DRC issued a regulatory notice compelling mining companies to conduct human rights due diligence at various levels of the mining supply chain.105 An example of home state action is seen in Canada. In 2009 Canada published its first corporate social responsibility strategy, which was further enhanced in 2014.106 The goal of the Canadian CSR strategy is to assist Canadian companies in strengthening their CSR practices and maximizing the benefits of their investments. The guidance includes the UNGP and the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High Risk Areas as benchmarks for Canadian companies. Furthermore, after the ineffective ibid. See, for example, the Danish ‘Act amending the Danish Financial Statement Act (Accounting for CSR in large businesses’ (Norwegian, 16 December 2008) accessed 19 January 2019; UK ‘Modern Slavery Act 2015’ Chapter 30. accessed 19 January 2019. 104 The American Dodd–Frank Wall Street Reform and Consumer Protection Act, Sections 1502 and 1504; Canadian Extractive Sector Transparency Measures Act (2014) SC c.39, s.376. 105 Note Circulaire No 002/CAB​.MIN/​MINES/​01/​2011 du 06 Septembre relative a l’application obligatoire des directives de recommandations du Guide de Devoir de Diligence de l’OCDE et de la résolution 1952 (2010) du Conseil de Sécurité de l’ONU dans le secteur minier Congolais), [Circular Note No 002/CAB​.MIN/​MINES/​01/​2011 of 06 September on the mandatory application of the OECD Due Diligence Guidelines and UN resolution 1952 in the Congolese mining sector]. In May 2012 Congo Minerals and Metals (trading as TTT Mining) and Huaying Trading Company were suspended for failing to undertake due diligence: accessed 20 February 2019. 163 For example, in 2009, the fund dropped Barrick Gold’s stock because of the egregious damage caused at the Porgera mine. John Archer, ‘Norway oil fund expels Textron, Barrick Gold’ Reuters (30 January 2009), accessed 20 February 2019.

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9. The use of disclosure-based regulation to advance the state’s duty to protect Jena Martin1

1. INTRODUCTION There are many ways in which a state can fulfil its duty to protect under the ‘Protect, Respect and Remedy’ Framework.2 Recently, there has been a notable increase in states using a disclosure-based framework that focuses on societal and human rights-related issues to address corporate malfeasance in this area. This is a marked departure in that, prior to these new laws, states’ use of disclosure or transparency laws for corporations was primarily a way of discovering financial or product-related information (such as for securities market regulation or consumer protection). The idea is an appealing one – use the disclosure-based system to allow investors and consumer to: (1) engage with companies on these issues;3 (2) initiate litigation against companies based on significant non-disclosures;4 or (3) (failing that) divest themselves of the company (or its products) and perhaps cause reputational harm to the company that may in fact result in a shift in corporate policy. But are these laws effective? The aim of this chapter is to discuss whether states can fulfil their Pillar One obligations through the use of disclosure.5 Among the issues that this chapter will examine is whether disclosure-based regulation is simply another form of ‘naming and shaming’ (traditionally used by human rights advocates with varying success), or whether having the imprimatur of the state provides for a more robust means of engagement with, and enforcement of, the business and human rights agenda.

This chapter was supported by WVU College of Law’s Hodges Faculty Research Grant. Many thanks go to Kristen Pennington for extraordinary research assistance. This chapter is adapted from an article that first appeared in the Columbia Transnational Law Journal. 2 John Ruggie, Report of the Special Representative of the Secretary General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, Protect, Respect and Remedy: a Framework for Business and Human Rights (A/HRC/8/5, 7 April 2008) (hereinafter the Three Pillar Framework) accessed 16 July 2017. 3 Many socially minded institutional investors (such as Calvert Investments and the Interfaith Center on Corporate Responsibility) engage with corporations on social issues. Their investment strategies also reflect these initiatives. 4 For instance, in the United States, investors could bring an action under Securities Exchange Act Rule 10b-5 for material omissions if: (1) the omissions led to a half-truth or (2) the corporation was under a duty to disclose the information. See Rule 10b-5 and Basic Inc v Levinson [1988] 485 US 224. 5 Specifically, Pillar I of the Three Pillar Framework involves the state duty to protect its citizens from human rights abuses by nonstate actors, including corporations. Three Pillar Framework (n 2) 7. 1

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The use of disclosure-based regulation to advance the state’s duty to protect  177 Specifically, this book chapter will examine the roles of disclosure-based regulation in moving the business and human rights agenda forward. The chapter will focus primarily on rules being implemented in the United States (US) at both the municipal and the federal levels; however, it will also discuss approaches being used in European jurisdictions such as the United Kingdom (UK) and France, and the overall trend towards a transparency model for business and human rights protection. Section II of this chapter will provide an overview of relevant disclosure laws in the US, the UK and France. This part will also briefly discuss other initiatives that are moving forward based on a transparency model. Section III analyses these regimes and discusses the benefits and consequences of using disclosure to combat negative business and human rights impacts. Specifically, Section III will focus on three main challenges: (1) the use of a transparency model with no correlative remedy; (2) the misalignment of current disclosure laws from their objectives (especially given the fact that, traditionally, disclosure regulation has been focused on financial based disclosure rather than social justice impacts); and (3) the overall feasibility of a disclosure-based methodology for regulating business and human rights events. Finally, section IV will analyse whether the state’s duty to protect can be met solely with disclosure laws, or whether other mechanisms need to be employed.

2.

OVERVIEW OF THE DISCLOSURE REGULATORY LANDSCAPE

Laws that promote a corporate disclosure framework generally operate under a laissez faire approach. Rather than requiring actors within the system to undergo certain specific substantive activities, the law’s aim is usually to empower other actors within the framework – investors, consumers or civil society – to obtain information that can then be used to engage directly with the corporation. Some have called this regime an advanced version of the naming and shaming campaigns in which civil society has traditionally engaged,6 the principal difference being that the information in a disclosure framework is more easily available to advocates (in traditional approaches the members of civil society would have to research the information on their own). For others, a disclosure framework is a way for stakeholders to make informed decisions in the marketplace, either through the purchase of a corporation’s stock,7 or through the purchase of a corporation’s product.8

See, eg, Marcia Narine, ‘From Kansas to the Congo: Why Naming and Shaming Corporations through the Dodd-Frank Act’s Corporate Governance Disclosure Won’t Solve a Human Rights Crisis’ (2013) 25 Regent University Law Review 351 (discussing the SEC’s Dodd–Frank rules through a naming and shaming paradigm). 7 For a detailed critique of the disclosure framework and its application in the US securities markets see Jena Martin, ‘Changing the Rules of the Game: Beyond a Disclosure Framework for Securities Regulation’ (2015) 118 West Virginia Law Review 59. 8 For an analysis of transparency frameworks and how effective they are for consumer purchase decisions see Marcia Narine, ‘Living in a Material World – From Naming and Shaming to Knowing and Showing: Will New Disclosure Regimes Finally Drive Corporate Accountability for Human Rights?’ in Jena Martin and Karen E Bravo (eds), The Business and Human Rights Landscape, Moving Forward, Looking Back (CUP 2016). For a discussion of transparency codes in supply chains see Meredith Miller, ‘Corporate Codes of Conduct and Working Conditions in the Global Supply Chain: Accountability 6

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178  Research handbook on human rights and business While some have called for an international corporate disclosure regime,9 the current framework for using disclosure as a way of regulating corporate behaviour is happening exclusively at the national level. For instance, in the US, disclosure-based human rights regulation is found at both the federal and federated-state level. 2.1

US Federal Jurisdiction

In the US, the idea of using disclosure to address non-financial issues is not (contrary to the overarching securities narrative) a new one.10 Indeed, as far back as 1971,11 the US Securities and Exchange Commission (SEC) has promulgated rules that required companies to take into consideration the environment and civil rights as part of its disclosure obligations. More recently, the SEC, as a result of Congressional legislation, adopted rules that would have fit squarely within the business and human rights agenda.12 Specifically, in 2012 the SEC promulgated rules required under sections 1502 and 1504 of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank)13 that were designed, in part, to: (1) minimize corruption (in the case of the Resource Extraction Payment Rule); and (2) mitigate violence in the Democratic Republic of Congo (DRC) (in the case of the Conflict Mineral Rule). Since their promulgation, each of these rules has had its own wayward path to implementation, including court interventions and lawsuits in various US jurisdictions (with significantly different results), and are now, in light of the current US presidential administration (and its actions), essentially moribund in their efficacy. Both rules are designed to adopt and implement measures that were required under Dodd– Frank, a law passed by Congress in the wake of the US financial crisis of 2008–9, related to turmoil in the financial and securities markets. As part of Dodd–Frank, Congress directed the SEC to issue rules that would require (1) corporations that were doing business in the DRC (under section 1502) and (2) corporations that were engaged in a resource extraction industry (under section 1504) to provide certain information relating to their business dealings. Both sections 1502 and 1504 had strong human rights overtones. Section 1502 was designed to prevent the funding of military and paramilitary troops in the DRC – groups that were involved in significant human rights abuses in the area, not least of which were countless sexual

through Transparency in Private Ordering’ in Jena Martin and Karen E Bravo (eds), The Business and Human Rights Landscape, Moving Forward, Looking Back (CUP 2016). 9 See, eg, Larry Catá Backer, ‘From Moral Obligation to International Law: Disclosure Systems, Markets and the Regulation of Multinational Corporations’ (2008) 39 Georgetown Journal of International Law 591, 593. 10 To be sure, the use of disclosure has not been the dominant tool to address social issues in the US. The primary (indeed the dominant) use of disclosure, at least in securities regulation, has been to discuss financial regulation. However, the exceptions are noteworthy if for no other reason than that they provide a precedent for future endeavors in that area. 11 Disclosures Pertaining to Matters Involving the Environment and Civil Rights (Securities Act Release No 5170 1971) 13; Fed R 13989 cited in Gerard Caron, ‘SEC Disclosure Requirements for Contingent Environmental Liability’ (1987) 14 Environmental Affairs Law Review 729, 732. 12 Unfortunately, each had a rather ignominious end. See discussion IA (1) and I (A) (2) infra for details. 13 Dodd–Frank Wall Street Reform and Consumer Protection Act 2010 (Pub L 111-203, HR 4173).

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The use of disclosure-based regulation to advance the state’s duty to protect  179 assaults of young women.14 Section 1504 was enacted in part to prevent the continuation of the resource curse, where countries rich in natural resources are often left impoverished after payments and capital are diverted from citizens to the (often corrupt) government or other powerful stakeholders.15 Both rules promulgated under the respective sections of Dodd–Frank have had very different paths but met with a similar dismal ending for human rights advocates. Each adopted rule (and its history) will be examined in turn. 2.1.1 The SEC’s Conflict Mineral Rule Section 1502 of the Dodd Frank Act states: It is the sense of Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence, and contributing to an emergency humanitarian situation therein, warranting the provisions of section 13(p) of the Securities Exchange Act of 1934, as added by subsection (b).16

As such, Congress directed the SEC to promulgate regulations requiring reporting companies to ‘disclose annually … whether conflict minerals that are necessary as described in paragraph (2)(B) … did originate in the Democratic Republic of Congo’.17 The SEC adopted Rule 13p-1 in compliance with Dodd–Frank on 22 August 2012.18 The final rule as adopted had several disclosure requirements. Specifically, Item 101 paragraph (c) of Form SD (a specialized disclosure report developed in tandem with the final rule) required all reporting companies, after conducting a reasonable country of origin inquiry, to determine whether any of their necessary products contained conflict minerals that originated in the DRC. If it was determined that the ‘registrant knows that any of its conflict minerals originated from the DRC’,19 then the following would be necessary: (1) Exercise due diligence on the source and chain of custody of its minerals;

14 According to one estimate, 48 women are raped every hour in the DRC, earning it the nickname of the rape capital of the world. Jo Adetunji, ‘Forty-Eight Women Raped Every Hour in Congo – Study Finds’, The Guardian (12 May 2011)  accessed 16 July 2017. 15 For a general discussion of the resource curse and how it fits within the business and human rights framework see Nyakundi Michieka and Dustin Blankenship, ‘Avoiding the Resource Curse, Applying the Guiding Principles in Kenya’ in Jena Martin and Karen Bravo (eds), The Business and Human Rights Landscape, Moving Forward (CUP 2016). 16 Dodd–Frank (n 13) Sec 1502. 17 According to Sec 1502, para. (2)(B) of the Dodd–Frank Act (n 13), the corporation must report on conflict minerals that are ‘necessary to the functionality and or production of a product manufactured by the corporation’. Sec 1502, para 3(B)(4) of the Act defines conflict minerals as ‘columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives’. Ironically, even though the traditional popular culture narrative of conflict minerals was popularized by ‘blood diamonds’, diamonds are not on the defined list of conflict minerals. For more on the dichotomy see accessed 16 July 2017. 18 SEC Release No 34-67716 (2012). Hereinafter SEC Conflict Minerals Rule at 347. 19 ibid, Rule at 347.

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180  Research handbook on human rights and business (2) File reports regarding all of this on its website under a specialized disclosure report entitled ‘Conflict Minerals Disclosure’ or file a separate report in its filing with the SEC.20

Additionally, the Conflict Minerals Report was required to contain the following items: (a) Due diligence: ‘a description of the measures the registrant has taken to exercise due diligence on the source and chain of custody of those conflict minerals.’21 (b) A statement regarding an independent audit that the company has undertaken in order to be in compliance with the rule. (c) A risk mitigation analysis, discussing the steps taken to improve the corporation’s due diligence in this area.22

Part of the requirements embedded in 1502 was that the report, as prescribed by the SEC, should be made ‘available to the public on the Internet website’ of the reporting corporation.23 The rule was almost immediately challenged by the National Association of Manufacturers, who petitioned the courts in October 2012,24 claiming that the SEC’s rule violated the First Amendment of the US Constitution.25 The trial court in the matter granted the SEC’s motion for summary judgment, stating that the rule did not constitute compelled speech under the First Amendment.26 However, the US Court of Appeals for the DC circuit reversed in part and affirmed in part, holding that, while the SEC could mandate that corporations disclose whether or not their minerals were sourced from the DRC, it could not take the additional step of requiring corporations to label their products DRC-conflict free.27 As a result, the SEC issued updated guidance in April 2014 restating its expectations that companies would file reports in compliance with the rule, with the exception that corporations would no longer be required to describe products­­­as DRC-conflict free.28 In the short time during which the final rule was in effect, companies filed nearly 1,000 Conflict Mineral Reports under Item 101(c), indicating that the conflict minerals used in their

ibid, Rule at 348. ibid. 22 ibid. 23 ibid. 24 The procedural posture of this case is not straightforward. The petitioners first sought review of the rule with the National Ass’n of Mfrs v SEC [2014] US Court of Appeals, 748 F3d 359 (DC Cir 2014). The DC Circuit, claiming a lack of jurisdiction, remanded the matter to the trial court: ibid. After the trial court’s ruling (discussed above), the plaintiffs appealed this matter back to the US Court of Appeals: National Ass’n of Mfrs v S.E.C [2015] 800 F3d 518 (DC Cir 2015). The Circuit Court in an en banc decision in a companion case (related to the SEC’s Resource Extraction Rule) granted the SEC’s petition for rehearing. The Court reaffirmed its decision on 18 August 2015 in National Association of Manufacturers v SEC [2015] 800 F3d 518 (DC Cir 2015). 25 Under the First Amendment every person shall have the right to freedom of speech. Elsewhere the court has made clear that this constitutional protection extends to corporate legal persons as well as natural human beings. For a relatively recent reaffirmation of this policy, see Citizens United v Federal Election Commission [2010] 558 US 310. 26 National Association of Manufacturers v SEC, 956 F Supp 2d 43 (DC 2013). 27 National Association of Manufacturers v SEC, 748 F.3d 359 (DC Cir 2014). 28 Keith Higgins, Director, SEC Division of Corporation Finance, ‘Statement on the Effect of the Recent Court of Appeals Decision on the Conflicts Mineral Rule’ (29 April 2014). 20 21

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The use of disclosure-based regulation to advance the state’s duty to protect  181 operations could have come from the DRC or one of its neighbouring countries.29 However, the use of the Conflict Minerals Report appears to be short-lived. On 31 January 2017, Michael Piwowar, then Acting Chairman of the SEC, issued a directive to the staff requesting that they reconsider ‘whether the 2014 guidance on the conflict minerals rule is still appropriate and whether any additional relief is appropriate’.30 As a result, in April 2017, the SEC’s Division of Corporation Finance issued an updated statement stating that, in light of the court’s remand and the Acting Chairman’s request, ‘the Division of Corporation Finance has determined that it will not recommend enforcement action to the Commission if companies, including those that are subject to paragraph (c) of Item 1.01 of Form SD, only file disclosure under the provisions of paragraphs (a) and (b) of Item 1.01 of Form SD’.31 As a result, corporations will, in essence, no longer be required to engage in due diligence, disclose information regarding conflict minerals on their websites or file a Conflict Minerals Report with the SEC. 2.1.2 The SEC’s Resource Extraction Rule32 The SEC’s final rules regarding resource extraction have also gone through several iterations in attempts to comply with Dodd–Frank. Similar to section 1502 of the Dodd–Frank Act, section 1504 required the SEC to promulgate rules no later than 270 days after the law was passed on the issue of payments to foreign governments. Specifically, the law targets ‘resource extraction issuers’,33 requiring them to disclose whether they, their subsidiaries or any entities under their control have made any payments to a foreign government relating to ‘the commercial development of oil, natural gas or minerals’.34 The purpose behind this particular section of the law was to provide, in the words of one commentator, ‘a promising strategy to help lift this so-called “resource-curse” [through] natural resource revenue transparency’.35

For an empirical study of these first reports and an analysis of their effects on global governance see Galit Sarfaty, ‘Shining Light on Global Supply Chains’ (2015) 56 Harvard International Law Journal 419. 30 Specifically, Chairman Piwowar stated that, although the rule was partially stayed by the DC Circuit opinion, the case has ‘done little to stem the tide of unintended consequences washing over the Democratic Republic of Congo and surrounding areas’. Michael S Piwowar, Acting SEC Chairman, ‘Reconsideration of Conflict Minerals Rule Implementation’ (Securities Exchange Commission, 31 January 2017) accessed 16 July 2017. This is part of a larger signaling by the Trump administration that it will seek to dismantle many of the provisions of the Dodd–Frank Act, if not repeal the law in its entirety. For a recent discussion on this trend and how it fits within the larger disclosure framework, see Karen Kunz and Jena Martin, ‘Why Dodd Frank – or Its Repeal – Won’t Save Us from the Next Crippling Wall Street Crash’ (4 May 2017) SALON accessed 16 July 2017. 31 SEC, ‘Updated Statement on the Effect of the Court of Appeals Decision on the Conflict Minerals Rule’ (US Securities Exchange Commission, 7 April 2017) accessed 16 July 2017. 32 For a review of the intersection between the resource curse and a business and human rights framework see Michieka and Blankenship (n 15). 33 Dodd–Frank (n 13) Sec 1504. 34 ibid. 35 Daniel Firger, ‘Lifting the Resource Curse: Will Dodd Frank Do the Trick?’ (Blog, Huff Post, 28 September 2010) accessed 16 July 2017. 29

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182  Research handbook on human rights and business As one commentator wrote, the Resource Extraction Rule has ‘had a tortured history’.36 The initial rule,37 which was adopted by the SEC on 22 August 2012, was vacated by a US District Court in the District of Columbia in July 2013.38 Subsequently, Oxfam sued the SEC in the US District Court of Massachusetts, stating that, because the SEC’s rulemaking authority in this instance was prescribed by statute, the agency’s inaction resulted in a violation of the Administrative Procedure Act.39 The court agreed and ordered the SEC to develop another rule. On 27 June 2016, the SEC complied and promulgated another rule.40 Specifically, in the reconfigured rule,41 the SEC ‘sought to balance the various statutory interests at issue in this rulemaking: on the one hand, providing transparency to help combat corruption and promote accountability, and on the other hand, doing so in ways that reflect a consideration of competition, efficiency, capital formation and costs’.42 However, on 3 February 2017, the first Congress under the Trump Administration used a little known and rarely used provision of US federal law, the Congressional Review Act (CRA), to repeal the rule.43 As a result, both federal efforts under Dodd–Frank have effectively been eviscerated. While the SEC’s regulatory push to implement provisions of the Dodd–Frank Act are the primary method through which the US government has engaged with disclosure-based initiatives in this area, there have been others. For instance, Congressional legislators have, over a number of different legislative sessions, introduced a bill that would require supply chain disclosure (similar to the California law, discussed below).44 However, to date the bill has not moved forward.

Nicholas Grabar and Sandra Flow, ‘Congress Rolls Back SEC Resource Extraction Payments Rule’ (Forum at Harvard Law School on Corporate Governance and Financial Regulation, 16 February 2017). 37 SEC (n 20) Disclosure of Payments by Resource Extraction Issuers (US Securities Exchange Commission, Aug 2012) hereinafter 2012 SEC Resource Extraction Rule. 38 American Petroleum Institute et al v Securities and Exchange Commission [2013] 953 F Supp 2d 5 (DDC 2013). Specifically, the court found that the SEC was not required to publicly disclose information regarding the payments (as many corporations argued it would be sensitive information that should be kept confidential). Second, the court found that the SEC’s decision not to grant an exemption for companies who work in countries ‘that prohibit payment disclosure was arbitrary and capricious’ and therefore a separate ground for invalidating the final rule: ibid, 20. 39 Oxfam America, Inc v Securities and Exchange Commission [2015] 126 F Supp 3d 168 (D Mass 2015). 40 ibid. 41 SEC (n 20) 7 (hereinafter 2016 SEC Resource Extraction Rule) accessed 16 July 2017. Another way that the SEC sought to reduce the burden on corporations was by allowing multinational corporate filers to use frameworks in other jurisdictions to comply with the rule. For instance, in the intervening years between the SEC’s first promulgation of the rule (in 2012) and its subsequent adoption, a number of foreign jurisdiction passed similar transparency laws, including in Europe (through the European Parliament and the Council of European Union) and Canada. In adopting its final rule, the SEC held that compliance with any of these frameworks would satisfy compliance under Rule 13q-1. 42 SEC 2016 Resource Extraction Rule, 27–28. 43 See Grabar and Flow (n 36). Under the CRA, Congress is allowed to use a simple majority vote to disapprove of a rule that has not yet become effective. Moreover, any vote under the CRA is not subject to judicial review: ibid. 44 In 2016, legislators Carolyn Maloney and Chris Smith introduced the Business Supply Chain Transparency on Trafficking and Slavery Act (S 1968, HR 3226). In addition to the 2016 legislative session, the bill was introduced in 2013–14 (as HR 4842). 36

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The use of disclosure-based regulation to advance the state’s duty to protect  183 2.2

The Initiatives of State Governments: California

In the United States (and arguably worldwide),45 no state government has made greater strides towards interweaving disclosure with human rights issues than the state of California. In 2010, the California legislature passed the Transparency Supply Chains Act (TSCA or SB657).46 The TSCA, which went into effect in 2012, requires corporations with worldwide annual revenue of more than USD100 million to disclose on their corporate website initiatives to eliminate slavery and human trafficking in their relationships with their vendors.47 Under the law, a company must disclose initiatives to eliminate slavery and human trafficking through five methods: (i) verification and evaluation of trafficking risk in its supply chains; (ii) auditing of suppliers; (iii) supplier certification; (iv) accountability standards and procedures for both employees and suppliers; (v) corporate training on slavery and human trafficking.48 In addition, SB657 requires companies to (i) specify whether they have established supplier compliance systems and (ii) state whether those supplier compliance systems use independent and unannounced audits. Nonetheless, some civil society organizations have urged corporations to go beyond these minimal provisions to establish auditing mechanisms and provide transparency to the general public regarding these auditing mechanisms.49 Similar to the federal disclosure initiatives, SB657 does not require companies to take steps to fix issues regarding human trafficking in their supply chain. Rather, it simply requires companies to report on what steps (if any) they are taking to address issues of trafficking.50 However, unlike the disclosure-based regime at the federal level (which was designed for a shareholder regime), the California initiative ‘is aimed at providing information to consumers, allowing them to make better, more informed choices about the products that they buy and the companies that they support’.51 In addition, SB657 requires that such reporting takes place directly to the public by having disclosures placed prominently on the company’s website. This method of direct public reporting has both advantages and disadvantages. On the one hand, having the disclosure prominently featured on the corporation’s website increases public access to this information by having it directly placed in consumers’ hands (whereas investors or potential investors

45 California is the eighth largest economy in the world: accessed 16 July 2017. 46 California Transparency in Supply Chains Act. Cal Civ Code 2012 Sec1714.43 (West 2012) (hereinafter TSCA SB657). 47 ibid. 48 ibid. 49 See, eg, ‘Effective Supply Chain Accountability: Investor guidance on Implementation of the California Transparency in Supply Chains Act and Beyond’ (Business & Human Rights Resource Centre, November 2011) accessed 16 July 2017. 50 TSCA SB657. 51 Alan Gutterman, ‘California Transactions Forms Business Transactions’ (March 2017) Update Ch 24 Sales James F Brown and Sally K Smith 24:30.30 Disclosure Statement in compliance with the California Transparency in Supply Chains Act.

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184  Research handbook on human rights and business must, typically,52 either wait for the corporate reports or use the SEC’s Edgar system to access the information that they need). On the other hand, having the SEC act as a monitor for this type of information means that SEC staff are responsible for monitoring corporate reports. It is unclear whether there is anyone in the California Attorney General’s office who has a similar function.53 On its face, consumers have no private right of action for violations of SB657. Rather, ‘the Attorney General has the exclusive jurisdictional authority to being an action for injunctive relief for a violation of this law’.54 As a result, while consumers and civil society can use information to make purchasing decisions or shed light on issues regarding potential human rights abuses, if a company does not comply with SB657 the California Attorney General’s office has exclusive jurisdiction for remediating the issue. Moreover, given the resource limitations that plague most national and municipal agencies, the staff most likely must rely on the public to obtain information regarding whether a corporation is in compliance.55 There are several additional limitations to SB657. For instance, the Business & Human Rights Resource Centre, along with the civil society group KnowtheChain, created a project around this issue that seeks to hold to account corporations that are within the scope of the Act. As the KnowtheChain authors note, ‘it is not possible to definitively determine all of the companies that are subject to the law with current public information’.56 Determining who is within the ambit of the law is an important first step in any legal regime. The list of corporations who are required to make disclosures is procured by the Franchise Tax Board and made available to California Attorney General.57 However, having no readily accessible database to determine it is problematic. In addition, SB657 has no periodic reporting requirement – rather, it seems that once a corporation has made an initial disclosure, there are no updating obligations. In order to be effective, a corporation’s monitoring system should be updated frequently. Finally, beyond all the limitations of SB657, many commentators do not believe the law to be an effective way of eradicating forced labour in the supply chain,58 precisely because it relies on a disclosure-based regime.59

52 Although, in the case of the Conflicts Mineral Rule, the conflict minerals disclosure required under Item 101(c) would also have been featured on the corporation’s website. 53 Although there are some signs that this may be occurring. See, eg, FAQs – SB657 Q: ‘What should I do if I think a company subject to the Act does not report the required disclosure? The Attorney General has created an email account to accept inquiries and reports related to the California Transparency in Supply Chains Act. Please direct any such inquiries or reports to SB657@​doj​.ca​.gov.’ https://​oag​.ca​.gov/​ SB657/​faqs 54 ibid. 55 To that end, there has been some movement to document this information. For instance, KnowtheChain prepared a project that researched whether corporations had published any disclosure as mandated by SB657. If they determined that a company had not, they contacted it directly. For an expanded analysis of compliance with SB657 see Adam Chilton and Galit Sarfaty, ‘The Limitations of Supply Chain Disclosure Regimes’ (2017) 53 Stanford Journal of International Law 1. 56 ibid. 57 s 19547.5 ‘List of retail sellers and manufactures required to disclose efforts to eradicate slavery and human trafficking to be provided to Attorney General’ Ann Cal Rev & T Code Sec 195475 (2011). 58 See, eg, Alexandra Prokopets, ‘Trafficking in Information: Evaluating the Efficacy of the California Transparency Act in Supply Chains Act of 2010’ (2014) 37 Hastings International Law & Comparative Law Review 351. 59 See Chilton and Sarfaty (n 55).

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The use of disclosure-based regulation to advance the state’s duty to protect  185 Compliance, in turn, has proved challenging. For example, the results of KnowtheChain’s study showed that out of 129 companies approached by KnowtheChain that would appear to be within the purview of SB657 but had not yet posted statements, only 44 responded. 60 To date, the California Attorney General has not brought an action against a corporation for non-disclosure under SB657, even though KnowtheChain’s report concludes that many corporations have failed to comply with the statute. Although no enforcement action has yet been taken, the Attorney General’s office has taken steps to notify companies of their obligation to file under the Act.61 Specifically, on 1 April 2015, the California AG began sending out notices to potentially affected companies requesting that they comply.62 Ironically, although SB657 does not provide for a private cause of action, corporate defendants are now using the law as a safe harbour in lawsuits alleging violations of unfair competition laws,63 to wit, violations of the California Unfair Competition Law.64 For instance, in the Barber case, plaintiffs brought an action against Nestlé and Nestlé Purina Petcare for violations of those California statutes. Specifically, the plaintiffs alleged that the food in some of their cat food products come from seafood boats in the waters near Thailand and Indonesia that use forced labour. Moreover, the plaintiffs claim that Nestlé failed to disclose this fact on any of the relevant products. Interestingly enough, Nestlé does not dispute that forced labour has been used in these operations, merely stating that it cannot quantify how much of its product is implicated in forced labour. The defendants claim instead that their compliance with the Act creates a safe harbour against litigation for these types of claims, since the company purportedly complied with the regulation. In sum, it remains to be seen whether SB657 will produce any meaningful remedies for victims of human rights abuses. 2.3

The United Kingdom

In March 2015, the UK passed a disclosure-based law regarding human trafficking. The law, entitled the Modern Slavery Act (UK Act), was enacted to ‘make provision about slavery, servitude and forced or compulsory labour and about human trafficking, including provision for the protection of victims’.65 In addition to defining slavery and human trafficking, the UK Act includes Part 6, which discusses ‘transparency in supply chains’.66 Under Part 6, any business who falls within the parameters of the UK Act must prepare an annual ‘slavery and human

60 Business & Human Rights Resource Centre, ‘Know the Chain – See which companies do and do not have statements under the California Transparency in Supply Chains Act (2014)’ accessed 16 July 2017. 61 See accessed 16 July 2017. 62 See . 63 See, eg, Barber v Nestlé USA, Inc [2015] 154 F Supp 3d 954 (ND Cal 2015). 64 (‘UCL’), Cal Bus & Prof Code, Sec 17200 et seq, violations of the California Legal Remedies Act (‘CLRA’), Cal Civ Code Sec 1750 et seq, and violations of the California False Advertising Law (‘FAL’), Cal Bus & Prof Code, Sec 17500 et seq. 65 UK Modern Slavery Act 2015 accessed 16 July 2017. 66 ibid.

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186  Research handbook on human rights and business trafficking statement’.67 Similar to SB657 (upon which the UK Act was reportedly modelled), the UK Act does not require a corporation to take active, specific steps to eradicate slavery or trafficking from its supply chains. Rather, under the UK Act corporations are merely required to prepare a statement that either (i) documents the steps the corporation has taken to ensure that there is no slavery or trafficking within its supply chain or (ii) declares that the corporation has taken no such steps.68 Most of the details outlining a corporation’s annual statement are listed as suggested parameters that a corporation may discuss in its statement. They include the following: (1) (2) (3) (4)

the corporate structure and its current supply chains; any corporate policies regarding slavery and trafficking; any corporate due diligence policies in its own operations and its supply chains; a discussion of particular high-risk areas for slavery and trafficking and steps that the corporation has taken to assess and manage this risk; (5) overall corporate effectiveness in eliminating slavery and trafficking from its supply chains, as measured against other performance indicators that the corporation considers ‘appropriate’; and (6) any training that the corporation makes available to its staff on the issue.69

Similar to other disclosure laws, the UK Act does not require a company to take specific substantive steps to eradicate slavery or trafficking from its supply chain. Instead, the UK Act merely requires corporations to report on any action (or inaction) that it has taken on this issue. The method of publication is also the same, in that both the UK Act and SB657 require corporations to place these statements on their website. However, in many other ways the UK Act differs significantly from the scope of SB657. For instance, unlike SB657, the UK Act applies to all industries, not simply manufacturing and retail. In addition, the threshold and jurisdictional requirements to be brought within the purview of the UK Act are significantly lower than the ones required for SB657.70 The UK Act came into force in October 2015. As of January 2017, only 27 of the FTSE 100 companies had complied with the law.71 As of June 2017, of the approximately 12,000 companies that are required to comply with the UK Act, only 2,112 (or 17.6 per cent) had published the required statements.72 Unlike SB657 (which requires only a one-time statement), 67 Specifically, all businesses that supplies goods and services and have a ‘total turnover of not less than an amount prescribed by regulations made by the Secretary of State’: ibid (which are currently set at £36m). 68 ibid. 69 ibid. Many of these provisions echo issues discussed in terms of a corporation’s responsibility under the UNGPs. For instance, the suggestion that corporations’ statements include references to any policies and due diligence echoes Principles 16 and 17. 70 In comparison to the California provision, the UK provision was deliberately designed to set a lower threshold for receipts in order to capture a wider cross-section of corporations. accessed 16 July 2017. 71 Patricia Carrier and Joe Bardwell, ‘How the UK Modern Slavery Act Can Find Its Bite’ (Open Democracy, 24 January 2017) accessed 16 July 2017. 72 Ulyana Androsova, Compliance Check: Gaps and Good Practices Appear in Modern Slavery Statements accessed 16 July 2017.

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The use of disclosure-based regulation to advance the state’s duty to protect  187 statements under the UK Act must be adopted every year. A further contrast between the UK Act and SB657 can be seen in who must sign and approve the relevant reports. Under the UK Act, the reports must be signed and approved by the Board. SB657 has no such requirement. The two laws also contrast with the sections of Dodd–Frank in that they apply to any commercial organization, regardless of whether (1) the organization is a corporation and (2) the entity is a publicly traded corporation with securities listed on a national exchange (as is required for the provisions of the Dodd–Frank Act, since the SEC rule only applies to reporting companies). Similar to US legislation, there does not appear to be a private right of action for corporate violations under the law. Rather, enforcement is invested in the Secretary of State, who is authorized to bring civil proceedings.73 In addition, of the now 75 statements made by corporations, a recent report found that the majority do not meet the minimum requirements for compliance under the law.74 Specifically, even for those companies that have reported, one organization estimates that only 19 per cent of those reports ‘meet the minimum requirements of the Act’.75 While there have been enforcement actions brought under the UK Act, none of the cases have been brought against corporations for failing to meet their disclosure obligations. Instead, enforcement proceedings to date have been brought against actual perpetrators of trafficking.76 Part 6 of the law has been used as a tool to engage in naming and shaming campaigns against corporations who fail to comply.77 2.4 Australia In Australia, amid growing calls for a law similar to the one passed in the UK,78 the federal government passed its own version of the Modern Slavery Act (the AU Act).79 The AU Act, which was passed in December 2018 (and which took effect in January 2019), requires any entity ‘based or operating in Australia’80 which has an annual consolidated revenue of more than 100 million AUD to provide annual reports regarding ‘the risks of modern slavery in UK Act at Part 6 (11). BHR Resource Centre, ‘Press Release: UK Modern Slavery Act – First 75 Statements in’ (BHR Resource Centre, March 2016) . 75 Anti-Slavery Australia, ‘Supplementary Submission to the Senate Legal and Constitutional Affairs Committee’ (13 August 2018) 7. The deficiencies include: inconsistent approval of the report by the Board of Directors; not having a board member sign the report; not posting a copy of the report to the company’s website. 76 Francis Churchill, ‘Modern Slavery Act Prosecutions More Than Quadruple’ (Chartered Institute of Procurement and Supply, 5 June 2017) accessed 16 July 2017. 77 ibid. 78 See, eg, Zoe Stojanovic-Hill, ‘The Case for Australian Modern Slavery Legislation’ (Honi Soit, 7 June 2017) accessed 16 July 2017; Su-San Sit, ‘Support Builds for Australian Slavery Law,’ (Chartered Institute of Procurement & Supply, 7 June 2017) accessed 16 July 2017. 79 Australia Modern Slavery Act (2018) accessed 16 July 2017. 80 ibid. 73 74

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188  Research handbook on human rights and business their operations and supply chains’,81 as well as information on what actions the company has undertaken to address those risks.82 Similar to other legislation, the reports will be maintained in a public repository, which can be accessed by the public, free of charge.83 The AU Act seems timely. As Australian MP Alex Hawke noted during the second reading of the bill, [There are] over 4,000 people in Australia estimated to enduring slavery or slave-like conditions. These victims are enslaved in mines, in factories, in brothels, in brick kilns, and on construction sites, fishing boats and farms around the world. Their exploitation involves serious crimes and grave human rights abuses and taints the goods and services that we use every day. Modern slavery in supply chains also distorts global markets, undercuts responsible businesses, and poses significant legal and reputational risks for companies. However, our current legislative framework does not directly target modern slavery within supply chains or support the business community to take action. This bill will address modern slavery risks in the supply chains of our goods and services by establishing a flexible, risk based reporting framework. This will transform the way the Australian business community responds to modern slavery.84

Some, however, are sceptical regarding whether the AU Act will be effective. As one commentator noted, ‘the UK experience does not encourage optimism as about compliance’.85 Nonetheless, the momentum continues. For instance, New South Wales, a state on the East Coast of Australia, has recently passed its own version of the bill, with a lower threshold reporting requirement (of 50 million AU).86 2.5 France Some states are moving beyond merely reporting to actually requiring a proactive due diligence obligation. For instance, in France, Law No 2017-399 passed in early 2017 requires corporations to engage in due diligence over human rights issues (including trafficking) within their supply chain. The law requires first that companies, if subject to the Act,87 develop a vigilance plan.88 The vigilance plan must relate to ‘the activity of the company’89 and its subsidiaries. The plan should include ‘reasonable vigilance measures’ to identify, among other things, human rights risks. The law also provides that companies consult with stakeholders in

ibid. ibid. 83 ibid. 84 Speech of Alex Hawke. relating to the Australia Modern Slavery Act, 28 June 2018 accessed 16 July 2017. 85 Paul Redmond, ‘At Last, Australia Has a Modern Slavery Act. Here’s What You’ll Need to Know’, The Conversation, 2 December 2018 accessed 16 July 2017. 86 New South Wales Government Modern Slavery Act 2018 No 30 accessed 16 July 2017. 87 The companies that are subject to the act include any company who employs at least two thousand people (at the end of two consecutive years) in their headquarters and whose head office is located in France. A company can also be liable if it employs ten thousand people within its direct and indirect subsidiaries and its headquarters are in France. 88 See accessed 16 July 2017. 89 ibid. 81 82

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The use of disclosure-based regulation to advance the state’s duty to protect  189 deciding how the due diligence plan should be drawn up. Specifically, according to the law, the corporate plan should have four parts: (1) (2) (3) (4)

a risk mapping document that allows the corporation to identify, analyse and rank issues; procedures that regularly assess the relationships with subsidiaries, subcontractors and suppliers; a policy for mitigating risks and serious harms; and a mechanism to assess the plan’s effectiveness.90

The French law also has a reporting obligation component, in that it requires companies to publish their plan in an annual management report. However, in addition to their reporting obligations, companies must actually implement a due diligence plan and undertake ‘reasonable vigilance’ to make sure the plan is implemented. In this sense, the French law’s due diligence requirement is much broader than the UK’s in that, according to scholars analysing the law, it goes beyond mere reporting to establishing a specific duty of care.91 Moreover, failure to adhere to the duty of care could lead to litigation: while the original bill would have specifically allowed civil penalty provisions, this was struck down by the Constitutional Council; nonetheless, a litigant that has been harmed by a business’ failure to establish a vigilance plan could, in theory, seek damages under a corporate negligence theory.92 Much like the UK Act (and in contrast to SB657), the French law applies to any corporation, regardless of industry, (1) that has at least 5,000 direct employees for two years in a row and (2) whose registered offices are in France.93 Similar to the other disclosure laws, the French law does not require that slavery or trafficking actually be eradicated; rather, it simply requires that companies engage in oversight.94 Two days after the law was passed, several members of Parliament asked the Constitutional Council to examine ‘the law’s compatibility with the French constitution’.95 On 23 March 2017, the Council rendered its decision (saying that the law was constitutional).96 The law has now gone into effect.97

‘Relative au devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre’ (trans: ‘Relating to the duty of care of parent companies and sponsoring undertakings’), (Legifrance, 27 March 2017) accessed 16 July 2017. The implementation plan must be made public. There is also a three-month grace period for companies to comply. 91 Sandra Cossart et al, ‘The French Law on Duty of Care: A Historic Step towards Making Globalization Work for All’ [2017] The Business and Human Rights Journal 318. 92 Sarah Altschuller and Amy Lehr, ‘The French Duty of Vigilance Law: What You Need to Know, Corporate Social Responsibility and the Law’ (3 August 2017) . 93 ibid. A corporation can also be within the law’s jurisdiction if it has at least ‘ten thousand employees within it and in its direct or indirect subsidiaries whose registered office is located in France’. 94 See accessed 16 July 2017. 95 Sarah A Altschuller, ‘French National Assembly Adopts Corporate Duty of Vigilance Law’ (Foley Hoag LLP 28 February 2017); ibid; accessed 16 July 2017. 96 See accessed 16 July 2017. 97 For a more comprehensive discussion of the law see Cossart et al (n 91). 90

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190  Research handbook on human rights and business 2.6

EU Directive 2014/95/EU

In addition to the laws passed in Britain, Australia and France, there is continuing momentum within the larger European Union. For instance, in 2014 the European Parliament enacted Directive 2014/95/EU, another reporting provision that requires companies that are publicly traded on an EU member stock exchange to report information relating to the following six areas: ●● ●● ●● ●● ●● ●●

environmental issues; social issues; employee-related issues (including diversity); human rights; anticorruption; bribery.98

Specifically, the Directive requires large ‘public interest entities’,99 which have on average 500 employees during the reporting year, to include a nonfinancial statement that relates to the issues listed above. The Directive was established, in part, to ‘identifying sustainability risks and increasing investor and consumer trust’.100 However, given that – as some commentators have noted – ‘the phrasing of the amending directive is not entirely clear about which non-financial information should be disclosed’,101 it is uncertain whether the Directive will provide meaningful, consistent information for consumers and investors to use.

3.

THE EFFECTIVENESS OF DISCLOSURE LAWS102

The mounting global initiatives raise the question: are these laws effective at curtailing business and human rights abuses? While this is still a new area within the literature, there is already mounting debate regarding their effectiveness within this context. For instance, Meredith Miller, in proposing an increase in mandated reporting, states that ‘the argument for transparency is premised on the belief that conditions for workers in the global supply­chain will improve only if information is made available, if consumer expectations change and if corporate norms shift’.103 In contrast, Marcia Narine argues that non-financial disclosure

98 (EU Directive 2014/95/EU Para 6, October 2014) accessed 16 July 2017. 99 In Europe, the phrase ‘public interest entities’ is a specific term of art referring to the impact it has on the public. As such, the term usually includes large (often publicly traded) businesses. For more information on the specifics of the term see Accountancy Europe, Definition of Public Interest Entities in Europe: State of Play after the Implementation of the 2014 Audit Reform accessed 16 July 2017. 100 ibid. 101 Daniel Gergely Szabo and Kartse Engsig Sorenson, ‘Nordic & EU Company Law’ (LSN Research Paper Series No 15-01). 102 See accessed 16 July 2017. 103 Miller (n 8) 435.

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The use of disclosure-based regulation to advance the state’s duty to protect  191 regimes on their own are not enough to curtail human rights abuses in corporate supply chains, in part because the intended targets of disclosures (that is, consumers) often do not change their buying patterns even when faced with negative information regarding corporate behaviour.104 In this section I identify a number of impediments to the effectiveness of disclosure laws, including (1) limited availability to enforce remedies for noncompliance; (2) a misalignment between the ends of disclosure and the mission of the agencies that are often called upon to enforce these laws and regulations; and (3) a lack of understanding regarding the content of disclosure on the part of targeted beneficiaries. 3.1

Information with No Remedies

The state duty to protect under the Three Pillar Framework and the UNGPs would be rendered effectively meaningless if it did not encompass an attendant remedy. As stated in the Three Pillar Framework, ‘State regulation proscribing certain corporate conduct will have little impact without accompanying mechanisms to investigate, punish, and redress abuses’.105 It is ironic then that most of the regulatory actions taken by national and municipal governments in this regard have focused largely on embodying disclosure initiatives, which seems to involve much less government intervention into the affairs of businesses. Why? Because most mandated disclosure laws do not actually require corporations to actively engage to eradicate human rights abuses in their supply chains or even in their own operations. Instead, the laws merely require corporations to tell their targeted audience (be it investors or consumers) about the actions taken or not taken. The idea then is that if corporations are truthful in their disclosure, then it does not matter what their actions are – they will not face government action. Instead, the onus shifts to either consumers or investors to seek ways to pursue remedies for the underlying negative impact. However, given that most of the underlying abuses happen outside of the jurisdiction of the home state, bringing an action on the substance of the underlying impact is becoming increasingly difficult.106 Moreover, the remedies that are available are limited in their scope. Specifically, since the laws are not themselves critiquing the substance of the corporations’ actions, all remedy must be based on compliance with the law, namely, whether corporations have disclosed the information to the public. In addition, these laws generally do not have a private right of action, but rather must rely on the relevant governmental agencies, who often lack the mandate, staffing, resources or expertise to vigorously pursue noncompliant corporations.107 104 Narine (n 8) 231. For additional support on consumer apathy, see Shannon K O’Neil, ‘Beyond Supply Chain Transparency Laws’ (Council on Foreign Relations, 22 September 2016) accessed 16 July 2017. 105 Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, Protect, Respect and Remedy: A Framework for Business and Human Rights (7 April 2008). 106 For instance, after the Supreme Court’s decision in Kiobel, extraterritorial actions have been more difficult against any actor – whether state or nonstate. Even more recently, in its decision in Jesner v Arab Bank PLLC, the court held that a foreign corporation was firmly outside of the ambit of the statute. As such, it seems likely that the ATS, once a key weapon for human rights advocates in the fight to hold corporations accountable for human rights abuses, is largely a morbid access to remedy for victims of human rights abuses. 107 For instance, many have critiqued the SEC’s jurisdiction over 1502 and 1504 of the Dodd–Frank Act in part because the law is outside the SEC’s core mission regarding financial disclosures: see, eg,

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192  Research handbook on human rights and business 3.2 Misalignment Many scholars and practitioners in the area sense that one of the greatest challenges to disclosure-based regulation for business and human rights-related issues is what I characterize as a misalignment between the typical ends of laws designed to eliminate human rights abuses and the means by which they are being effectuated. This misalignment can arise in a number of ways. First, there is an argument that the means of disclosure cannot effectively achieve the end of eradicating human trafficking, since what disclosure is being asked to measure is different from what it needs to measure in order to be effective. Second, many commentators believe that, particularly in the case of the SEC, the mission of the agencies called upon to oversee these initiatives is significantly at odds with the business and human rights landscape.108 3.2.1 Measuring what you can measure The current disclosure regime is measuring processes not outcomes. Casey O’Connor and Sarah Labowitz found this in the context of human rights performance indicators.109 Specifically, they argue that ‘social measurement evaluates what is most convenient, not what is most meaningful’.110 To elaborate, O’Connor and Labowitz echo the findings of Chilton and Sarfarty in that they note that current measurement initiatives (similar to those initiatives embodied in mandatory disclosure regimes)111 target ‘efforts, not effects’.112 There is some question regarding whether these laws are actually effective. For instance, in June 2017, the UK company Waitrose became embroiled in controversy when it was discovered that its products were being made with slave labour113 – this despite the fact that Waitrose was fully in compliance with the UK Act. As commentators note, ‘Waitrose had been fully

Grabar and Flow (n 36) stating that the rules ‘presented special challenges for the SEC because Congress sought to use the SEC disclosure system to promote public policy objectives that were not directly related to the usual purposes of corporate disclosures’. But see ICAR, ‘Knowing and Showing: Using US Securities Laws to Compel Human Rights Disclosure’ 19 stating that ‘criticisms appear to fail to consider the legislative mandate to regulate “as necessary or appropriate in the public interest or for the protection of investors” … these criticisms also fail to consider the legislative history describing the original intended purposes of federal securities regulation, which have been argued to include greater social responsibility in corporate conduct.’ 108 Grabar and Flow (n 38). 109 Casey O’Connor and Sarah Labowitz, ‘Putting the “S” in ESG: Measuring Human Rights Performance for Investors’ (NYU Stern Center for Business and Human Rights, March 2017) accessed 16 July 2017. 110 ibid, 2. 111 The initiatives at issue in O’Connor and Labowitz’ reports concerned voluntary reporting initiatives implemented by either corporations, industry coalitions or civil society (either alone or in partnership with industries). For instance, one of the performance measurements that the report evaluated was Know the Chain, which measured corporate compliance with SB657. See above discussion of Know the Chain’s initiative of compliance with SB 657, 10–11. 112 O’Connor and Labowitz (n 111) 18. 113 Molly Anders, ‘On World Day Against Child Labour: Is the UK Modern Slavery Act Working?’ (Devex, 12 June 2017) accessed 16 July 2017.

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The use of disclosure-based regulation to advance the state’s duty to protect  193 in compliance with the law, yet they somehow missed the existence of possibly hundreds of slaves in their supply chain’.114 3.2.2 Mission creep There is also a question over whether the agencies tasked with overseeing social impact disclosures have the necessary expertise to do so. For instance, the issue of conflict minerals is most decidedly outside of the SEC’s core parameters of financial disclosure. As Daniel Firger notes, when you have untrained government agencies wading into the issue of business and human rights through reporting, there is the potential for a ‘mismatch between [a law’s] means and ends’.115 He elaborates, within the context of Dodd–Frank, stating: the legislation’s new transparency requirements rely for their effectiveness on SEC enforcement and shareholder activism, but seek to end foreign government corruption, not the domestic corporate malfeasance for which investor protection laws were written. Unlike the fight against insider trading, say, countering overseas corruption requires real, sustained engagement with faraway local actors and institutions. While disclosure of information by oil and mining firms may help, the bill’s focus on shareholders’ interests masks a dangerous disconnect between the protection of investors and support for foreign anti-corruption activists.116

3.2.3 Hiding in the light Another particular challenge goes to the nature of disclosure. At a fundamental level, can disclosure be used as a means to eradicate bad behaviour? Or is it simply another means of obtaining a reputational advantage without actually making substantive changes? This issue comes up in two ways. First, there is growing unease that disclosure is nothing more than a governmentally mandated public relations campaign that gives the issuer all the advantages of positive perceptions with very little cost to itself (because many consumers do not change their behaviour and because any bad consequences only occur if corporations get caught). Second there is a belief that, rather than illuminate an issue, disclosure can actually obfuscate and confuse things for the intended target. For instance, in the US securities regulatory framework, corporations are now required to file volumes of reports and disclosures that often amount to hundreds of pages, but that actually contain little substantive information.117 On the consumer side, the groundbreaking study by Adam Chilton and Galit Sarfaty shows that as applied to disclosures mandated by the CTSCA, consumers often do not understand the disclosures that they read. For instance, Chilton and Sarfarty’s study showed that consumers who read disclosures demonstrating low levels of due diligence rated corporations only slightly lower than those with disclosures that demonstrated high corporate due diligence.118

ibid. See accessed 16 July 2017. 116 ibid. 117 For a discussion of the perils of too much disclosure, see Karen Kunz and Jena Martin, When the Levees Break: Re-visioning Securities Market Regulation (Lexington Books 2017). 118 Sarfaty (n 55). In their article, Chilton and Sarfarty make a number of different arguments critiquing the effectiveness of mandated disclosure for corporate human rights abuses in supply chains. For instance, one of their major contentions is that mandated disclosures within the context of supply chain is even more attenuated because ‘while most [typical] disclosures concern the quality of a firm’s 114 115

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4.

UNDERSTANDING DISCLOSURE LAWS WITHIN THE STATE’S DUTY TO PROTECT

Given all the challenges in the design and implementation of disclosure laws, there is a strong argument that these types of laws are not the most effective way to effectuate a state’s duty to protect under the Three Pillar Framework. In addition to the challenges (alluded to in Section III) regarding the design and implementation of the current disclosure laws, the very nature of disclosure laws seems to be largely ineffectual in terms of implementing a state’s duty to protect. There are ten core principles espoused under the UNGPs relating to the state duty to protect.119 Of these, four bear particularly on the current trend in disclosure laws:120 Principle 1: Requiring states to ‘protect against human rights abuse within their territory and/ or jurisdiction’. This includes taking steps to prevent, investigate, and redress any abuse.121 Principle 2: Requiring that states clearly outline their expectations that business enterprises operating within the state’s jurisdiction ‘respect human rights throughout [the enterprise’s] operations’.122 Principle 3: Outlining how states should enforce laws, provide guidance and otherwise encourage businesses to communicate how they will address human rights impacts.123 Principle 8: Discussing how states should ensure that agencies and departments are fulfilling its human rights obligations, including through training and resources.124 Unfortunately, in evaluating these four principles in light of states’ efforts to use disclosure laws, it appears that states’ current use of disclosure laws are not significantly advancing their duty to protect. For instance, the commentary to Principle 1 outlines the standard that states must maintain in fulfilling their obligation to protect. According to the UNGPs, even if states are not directly involved in committing human rights abuses, they can still be violating their international standard of conduct if they ‘fail to take appropriate steps to prevent, investigate,

product or service, supply chain disclosures provide information on the process by which a product was manufactured ... Moreover, human rights related supply chain disclosures are likely to be uniquely difficult to interpret because they do not provide information on the actual number of human rights abuses a company has committed. They instead only provide information on the level of due diligence companies conduct to minimize the risk of human rights violations.’ ibid, 5. 119 UN Human Rights Commission, ‘Guiding Principles on Business and Human Rights (UNGPs)’ (HR/PUB/11/04, 2011) accessed 16 July 2017. 120 Although all ten principles could, in some way, impact disclosure laws, this chapter will only focus on the four deemed to be most relevant to the current disclosure law debate. In particular, Principle 7, which discusses the obligations of States in conflict prone areas will not be discussed because, although some of the disclosure laws do explicitly deal with conflict affected areas, most of the legislation can be applied more generally (in both conflict affected and non-conflict affected areas). 121 UNGPs (n 119) 3. 122 ibid. 123 ibid, 4. 124 ibid, 10.

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The use of disclosure-based regulation to advance the state’s duty to protect  195 punish and redress private actors’ abuse’. In this sense, most of the disclosure laws outlined in this chapter are inadequate to meet the obligations in Principle 1. This is because both the disclosure laws themselves and, it appears, the support given to enforcing these laws are inadequate to fulfil states’ obligations under Principle 1. First, as outlined above, the substance of the disclosure laws seemed fundamentally ill-equipped to handle states’ ability to investigate and redress human rights abuses. Because disclosure laws only relate to what business enterprises disclose regarding their relationships with suppliers and, to a lesser extent, issues within their own operations, there is little access to information that would allow states to properly investigate human rights abuses. This also relates to the shortcomings of disclosure laws as a way of addressing the issues involved in Principle 2. Because most of the states that have passed disclosure laws are in the Global North,125 and much of the focus regarding human rights abuses has been on supply chains located in the Global South, short of a mechanism that requires direct intervention on the part of corporations within their home state, disclosure laws will not adequately prevent human rights abuses. In that regard, the states that merely require that corporations report on their action (or inaction) are the least helpful in addressing this issue. States, such as France, that require a more robust due diligence mechanism may be further along in fulfilling their duty to protect.126 Why? Because the additional requirement of action on the part of corporations (under threat of prosecution) could serve as an additional impetus for corporations to take concrete action to ferret out human rights abuses within their relationships with other actors. The extraterritoriality implications are admittedly the most pernicious issues in actualizing the goals of the UNGPs. In that regard, Principle 2 itself seems a minimalist approach to enforcing human rights protection. Viewed within this lens, however, states have made some strides to effectuate the obligations under the UNGPs. It is just that what they have done is truly the bare minimum. The commentary to Principle 2, for instance, explicitly cites to laws that require parent companies to ‘report on the global operations of the entire enterprise’.127 Nonetheless, there are many different frameworks that can be used to effectuate a reporting regime. For instance, a state could require independent audits and certifications for a corporation’s operations abroad. Currently, with the exception of France, any requirement for certification or auditing is only a requirement to disclose whether these functions are being carried out. A corporation can be within the ambit of most of the laws discussed above if it merely notes that it has no auditing, certification or due diligence provision. Moreover, Principle 3 sheds some additional guidance on the nature of these laws. For instance, Principle 3 states directly that states should ‘enforce laws that are aimed at, or have the effect of, requiring business enterprises to respect human rights’. In this sense, the current disclosure laws fail in both respects. First, to date, there has been no enforcement action brought under any of the disclosure laws discussed in this chapter. This is despite the fact that there have been documented cases of corporations who have failed to abide even by the

Most but not all. For instance, in 2012, the DRC passed a law requiring corporations to conduct due diligence checks for conflict minerals within its supply chains and publish the results in an annual report . 126 However, as the French law is the most recently enacted, initial data is not yet available. 127 UNGPs (n 119) 4. 125

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196  Research handbook on human rights and business minimal standards of reporting.128 Second, as discussed above, the disclosure laws themselves do not have the ‘effect of ... requiring business enterprises to respect human rights’.129 Finally, Principle 8’s discussion of policy coherence seems to have largely been ignored by states. For instance, commentary to Principle 8 notes that ‘States need to take a broad approach to managing the business and human rights agenda [including] … supporting and equipping departments and agencies … that shape business practices – including those responsible for corporate law and securities regulation’.130 The US, in particular, seems to have missed the lesson embodied in this principle. Not only is the federal government not supporting agencies such as the SEC in attempts to advance the business and human rights agenda, but (as discussed above) it is in fact actively thwarting those efforts. While the SEC might not be the most appropriate agency for primary enforcement of the business and human rights agenda (as some seem to wish to make it), the agency most certainly has a role to play in the agenda’s advancement.

5. CONCLUSION For decades now, disclosure has been held out as the ultimate curative for every corporate woe. The expansion of disclosure initiatives beyond investment-related issues into social policy indicates that this trend will continue. Yet, as this chapter notes, within many jurisdictions disclosure laws are, at best, a temporary stopgap measure that can lead to limited improvements in human rights accountability. Perhaps, if undertaken thoughtfully and with good intentions, they can lead to real, structural or organizational change. However, if they are simply a mechanism to comply with reporting obligations, then the larger impact will be minimal. To that end, the legislation presented in this chapter represents a spectrum on the regulatory use of disclosure to advance the state’s duty to protect. On the one side of the spectrum, France’s law, which establishes a duty of care as well as indirect civil remedies, could prove to be a real step forward in advancing this duty under international law. On the other side of the spectrum, the EU Directive, with its vague allusions to what corporations are required to discuss in their reports, seems to offer little help in the state’s ongoing duty in this realm. The laws in the US, the UK and Australia seem to lie somewhere in the middle: capable of being used to advance the state’s duty to protect, but primarily relying on consumers, investors and civil society organizations to achieve that goal. Moreover, with the possible exception of the French law, none of the current laws allow private litigants to use the legislation as a direct cause of action. While adding private rights of action to the laws would, arguably, not categorically enhance the state’s duty to protect by specifically preventing, investigating and

128 For instance, in theory, under SB657 a corporation could be in compliance with the law by making the following statement: ‘we have made no efforts to eradicate trafficking or slavery in the following areas: verification of supply chains; conducting audits in supply chains, requiring suppliers to certify their materials, maintaining internal accountability. We also provide no employee and management training.’ Yet, even under this standard, many corporations had not been in compliance two years after the law went into effect. 129 UNGPs (n 119). 130 ibid, 11.

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The use of disclosure-based regulation to advance the state’s duty to protect  197 punishing human rights abuses (as the Guiding Principles require),131 it nonetheless would set up an environment of accountability that would enhance a state’s overall ability to fulfil its duty on these matters under international law. Part of the reason why a disclosure framework may be so popular is that it requires minimal state intervention into the work of corporations, thereby increasing corporate buy-in for the initiative. In addition, until an international treaty is developed that imposes direct liability on corporations, the national disclosure framework may be the best way to address the extraterritoriality issues presented in terms of regulating corporations and the negative impacts of their relationships when most of those impacts occur abroad.132 However, having states move beyond disclosure would be an important step in fulfilling their duty to protect. For instance, Brazil has published a list of firms that are found to have used forced labour. Any firm that is on the list undergoes extensive penalties, including ineligibility for state loans and receiving restrictions on the sale of products.133 Using mechanisms such as this would allow states to fulfil their Pillar I obligations more robustly than is allowed by the current disclosure regime. The irony here is that while states may be reluctant to move beyond disclosure laws in order to fulfil their duty to protect against businesses’ negative human rights impacts, the businesses themselves may be open to increased regulation. For instance, Virginia Mahin, an executive at Mondelez International, stated in an interview: For a law to be really effective we need to have some kind of enforcement mechanism. It’s not enough for companies to say that they are doing something about human rights in their supply chains. As a company, you should be rewarded for having strong due diligence systems and preventing abuses.134

Perhaps, then there is a way forward for both states and corporations on this issue.

ibid, 1. For two comprehensive discussions of the dynamics of extraterritoriality to the business and human rights framework see Daniel Augenstein and David Kinley, ‘When Human Rights “Responsibilities” become “Duties”’ (Sydney Law School Research, 20 September 2012) and ‘The Extra-Territorial Obligations of States that Bind Corporations’ in Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect, (CUP 2013); Anita Halvorssen and Karin Buhmann, Extraterritorial Regulation of Companies and the UN Guiding Principles on Human Rights and Business (Sage Law 2013). 133 Shannon K. O’Neil, ‘Beyond Supply Chain Transparency Laws’ (Council on Foreign Relations, 22 September 2016) accessed 16 July 2017. 134 Benjamin Fox, ‘Companies Will Support EU Law on Due Diligence, But Need Assurances on Liability’, Euractive (19 March 2019) accessed 3 March 2020. 131 132

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10. State jurisdiction over transnational business activity affecting human rights Doug Cassel

1. INTRODUCTION International law governing state jurisdiction over transnational business and human rights is not frozen in some fixed set of rules. The law evolves to reflect ongoing efforts to balance state interests in sovereignty with protection of human rights in a globalized economy.1 At present the balance of interests tilts toward state sovereignty at the cost of impunity for business infringements of human rights. This results in part from an inherent mismatch—a “governance gap”—between territorially bounded states and transnational business in a global economy.2 The only way to close this regulatory and remedial gap (short of some new or improved international mechanism) is for states to exercise jurisdiction over transnational business activities. Already the balance is shifting, albeit piecemeal and gradually. International law today broadly permits, generally encourages, and sometimes obligates states to exercise jurisdiction over transnational business activities emanating from or affecting their territories. General international law permits states to exercise jurisdiction over transnational business activity, at least so long as there is a “reasonable link”3 between the state and the activity, and a recognized basis for jurisdiction.4 States are encouraged to exercise jurisdiction over the human rights impacts of transnational business activity by widely endorsed international guidelines, such as the United Nations Guiding Principles for Business and Human Rights.5 And states are obligated to exercise jurisdiction over aspects of transnational business activity by various human rights treaties,6 universal jurisdiction treaties,7 and regional treaties,8 and arguably also by general principles of law.9 For purposes of business and human rights, the most important jurisdiction in practice is that exercised by a state over the transnational activities of businesses domiciled or headquartered, or with substantial business activities, in that state.10 Within reasonable limits, a home state 1 Dem. Rep Congo v Belg., Case Concerning the Arrest Warrant of 11 April 2000 [2002] ICJ 3, 63, Joint Separate Op of Judges Higgins et al 5. 2 Human Rights Council, ‘Protect, Respect and Remedy: A Framework for Business and Human Rights’ (UN Doc A/HRC/8/5, 7 April 2008) para 3. 3 Committee on the Rights of the Child, ‘General Comment No 16’ (UN doc CRC/C/GC/16, 17 April 2013) (‘GC 16’) para 43. 4 See section 3 below for recognized bases of jurisdiction. 5 Human Rights Council, ‘UNGPs’ (A/HRC/17/31, 21 March 2011) Principle 2. 6 See section 5.1 below. 7 See section 5.3 below. 8 See section 5.2 below. 9 See section 5.4 below. 10 GC 16 (n 3) para 43; Committee on Economic, Social and Cultural Rights, ‘General Comment No 24’ (UN doc E/C.12/GC/24, 23 June 2017 (‘GC 24’), para 26.

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State jurisdiction over transnational business activity affecting human rights  199 may regulate the global conduct of its own companies, including their transnational relations with subsidiaries and business partners.11 International law on jurisdiction is thus usually not, by itself, a major barrier to regulating transnational business activity, or to holding companies accountable for human rights violations outside their home states. However, practical and legal obstacles outside the scope of this chapter, including the doctrine of separate corporate identities, often interact with jurisdictional rules to thwart accountability. For example, a parent company’s home state may lack jurisdiction over its foreign subsidiary, while a host state may have jurisdiction over a subsidiary but not over its foreign parent company.12 The result is a regulatory and remedial gap. The main issue, however, is political will. Whether a state has jurisdiction over a transnational business activity depends on both international and domestic law. But the domestic laws of states generally do not take advantage of the full scope of jurisdiction permitted by international law.13 On the contrary, they fall far short. Fortunately, that situation is changing. Under pressure from civil society and parliaments, states now increasingly regulate,14 and national courts exercise jurisdiction over,15 transnational corporate conduct affecting human rights. Laws requiring companies to report and to exercise due diligence throughout their global activities have begun to proliferate.16 And international human rights treaty bodies increasingly insist that state duties under human rights treaties do not end at a state’s borders. A principal catalyst has been the UN Guiding Principles on Business and Human Rights (“Guiding Principles”),17 adopted by consensus in 2011 and now incorporated in other international, regional, and national frameworks.18 Although the Principles concerning the duties of states to protect human rights are not legally binding in and of themselves, they elaborate the implications of existing international law.19 Under the Guiding Principles, states should set out clearly the expectation that all business enterprises domiciled in their territory or jurisdiction respect human rights “throughout their operations,” wherever located.20 But the extent of this business responsibility to respect human rights is vague, and its enforcement ranges from weak to non-existent. Greater clarity and compliance could be achieved, in theory at least, by the treaty on business and human rights currently under negotiation (as of this writing in mid-2019) by a UN Intergovernmental Working Group.21 Time will tell whether this ambitious goal is realized.

GC 24 (n 10) paras 26, 33. See, eg, Ct Apps England & Wales, Okpabi v Royal Dutch Shell (‘Okpabi’) [2018] EWCA Civ 191. 13 American Law Institute, ‘Restatement of the Law Fourth: The Foreign Relations Law of the United States: Jurisdiction’ (2016) Sec 211 cmt b [hereafter ‘RS IV’]. 14 Eg, France in 2017 adopted a new ‘Law of vigilance’, officially the Loi relative au devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre (‘Law of Vigilance’). 15 Eg, Lungowe v Vedanta [2019] UK Supreme Court (‘Vedanta’) UKSC 20. 16 Eg, European Union Directive 2014/95/EU ‘as regards disclosure of non-financial and diversity information by certain large undertakings and groups’. 17 UNGPs (n 5). 18 Eg, Organization for Economic Cooperation and Development, ‘OECD Guidelines for Multinational Enterprises’ (2011 edn) (‘OECD’). 19 UNGPs (n 5) introduction, para 14. 20 UNGPs (n 5). 21 See Human Rights Council, Draft report on the fourth session of the open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human 11 12

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2.

“TRANSNATIONAL” VS “EXTRATERRITORIAL” JURISDICTION

Although legal analyses typically refer to a state’s “extraterritorial” jurisdiction over global business activity, a more accurate term is “transnational” jurisdiction. “Extraterritorial” implies that business activity takes place either within or outside of a state’s territory. In fact, the business activities of multinational companies and their global subsidiaries and business partners typically cross many national borders. Their activities are neither purely domestic nor entirely extraterritorial, but transnational. Consider Royal Dutch Shell. The global parent holding company presides over a corporate empire of more than 1300 companies registered in more than 100 states.22 To be effective, regulation or adjudication of claims against such a company must inherently be transnational. Although a single Shell subsidiary, operating in a single nation, might commit an isolated human rights abuse, most activities of subsidiaries take place within a broader, transnational framework of Shell policies, oversight, financing, and revenue transfers. Purely “extraterritorial” jurisdiction is conceivable. Until the territorial reach of the Alien Tort Statute was curbed in 2013 by the US Supreme Court in Kiobel,23 US courts entertained suits by foreign plaintiffs, against foreign defendants, for human rights violations in foreign territory.24 However, the US example “has not attracted the approbation of States generally.”25 Moreover, this purely extraterritorial jurisdiction was rejected by the US Supreme Court in Kiobel.26 Both legal and policy consequences flow from the reality of transnational—as opposed to purely extraterritorial—business activity. A state’s jurisdiction over transnational activity is more justifiable because at least some aspect of an infringement of human rights takes place in or has a genuine connection to the state. “Transnational” is also a more accurate description of internet transactions, which are by nature supra-territorial.27 Except when quoting sources using the term “extraterritorial,” this chapter therefore refers throughout to “transnational” jurisdiction.

rights (4th session report, October 2018); see generally Surya Deva and David Bilchitz (eds), Building a Treaty on Business and Human Rights: Context and Contours (CUP 2017). 22 Okpabi (n 12) para 82. 23 Kiobel v Royal Dutch Petroleum Co [2013] 569 US 108. 24 See, for example, Oona Hathaway, ‘Kiobel Commentary: The Door Remains Open to “Foreign Squared” Cases’ (SCOTUSblog 18 April 2013). However, the door closed further in 2018, when the Supreme Court ruled that foreign corporations could not be sued under the Alien Tort Statute. Jesner v Arab Bank [2018] 138 S Ct 1386. 25 Higgins et al (n 1). 26 Kiobel (n 23) at 111 (Roberts, Ch J, for majority), 127 (Breyer J concurring). 27 Eg, Court of Justice of the European Union (Grand Chamber, C-131/12, Google, 13 May 2014).

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State jurisdiction over transnational business activity affecting human rights  201

3.

PERMISSIVE TRANSNATIONAL JURISDICTION

3.1

Kinds of Jurisdiction

International law permits states to exercise three distinct kinds of jurisdiction: prescriptive, adjudicatory and enforcement. The extent of transnational jurisdiction varies among them. Each derives from distinct sources of international law. Each is important to regulation and accountability of transnational companies in matters of human rights. This chapter addresses only prescriptive and adjudicatory jurisdiction. Prescriptive jurisdiction, here referred to as “regulatory” jurisdiction, is the state’s authority to prescribe laws governing conduct, persons, or property.28 Adjudicatory jurisdiction is its authority to subject persons or things to its judicial or administrative adjudicatory processes.29 Enforcement jurisdiction, the state’s authority to compel compliance with law,30 including enforcement of foreign judgments in human rights cases, is also important, but limitations of space do not allow its treatment here, except to note that states may not enforce their laws on the territory of another state without that state’s consent.31 3.2

Bases of Jurisdiction

Both prescriptive and regulatory jurisdiction rest on common bases of permissible jurisdiction. They are labeled differently by various authorities; this chapter uses the classifications of the American Law Institute in its Restatement Fourth of the Foreign Relations Law of the United States.32 States may exercise jurisdiction based on “territory, effects, active personality, passive personality, or protection,”33 and over certain international crimes subject to universal jurisdiction.34 These six categories are not mutually exclusive; a state may exercise jurisdiction based on two or more when they apply.35 Moreover, customary international law evolves and the categories of state jurisdiction are not closed.36 Nor are their boundaries rigidly defined. As discussed below, some states have recently extended the scope of traditional bases of jurisdiction to cope with such global issues as bribery of foreign government officials, evasion of foreign taxes, modern slavery, and gross violations of human rights. 3.2.1 Regulatory (prescriptive) jurisdiction No broad-based multilateral treaty governs regulatory (prescriptive) jurisdiction. The general default rules are largely governed by customary international law.37 In 1927 a bare majority of the Permanent International Court of Justice held in the Lotus case that states may regulate RS IV (n 13) Sec 211 cmt a. ibid. 30 ibid. 31 See, eg, Nicaragua v US [1986] ICJ, Rep 14, para 202. 32 RS IV (n 13). 33 ibid, sec 211. 34 ibid, sec 217. 35 ibid, sec 211 cmt c. 36 ibid, sec 211 cmt c. 37 ibid, sec 211 cmt b. 28 29

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202  Research handbook on human rights and business any matter, except where prohibited by some rule of international law.38 The default rule was that states may exercise jurisdiction. The Lotus ruling has been widely criticized by scholars,39 states, and international judges.40 The more recent consensus is that states may generally regulate only when there exists a “reasonable link”41 between the state and the activity regulated, and a recognized basis for jurisdiction. (The “reasonable” link is sometimes referred to as “genuine,”42 “real and substantial,”43 or “sufficiently close.”44) However, recent state practice seems to accept ever more tenuous links as sufficient to justify the assertion of jurisdiction. 3.2.1.1 Territorial “Territorial” jurisdiction is exercised over conduct, property, or persons (including corporations) located within a state’s territory.45 However, the subject of regulation need not be found entirely within the state’s territory. A state may exercise “subjective territoriality” jurisdiction over conduct that occurs or begins in its territory but has effects elsewhere.46 Thus a state may regulate the policies and practices of a parent corporation headquartered in its territory, which may affect the activities of both the company and its subsidiaries outside its territory. Such state regulatory measures are “domestic measures with extraterritorial implications.”47 A state may also exercise “objective territoriality” jurisdiction over conduct that begins elsewhere but is completed within the state’s territory.48 Thus a host state may assert jurisdiction to regulate the conduct of a foreign parent company whose local subsidiary, acting within the host state, carries out the parent company’s policies affecting human rights. Both subjective and objective territorial jurisdiction can reach aspects of transnational corporate conduct. For example, the UK’s Modern Slavery Act defines the crime of human trafficking by a foreign national to include trafficking in which the victim’s “travel consists of arrival in or entry into, departure from, or travel within, the United Kingdom.”49 3.2.1.2 Active personality (“nationality”) States may regulate the transnational conduct of their own corporations. “Active personality,” or what might loosely be termed “nationality” jurisdiction, permits a state to regulate the “conduct, interests, status and relations” of its nationals,50 and of persons domiciled in the

ibid, sec 402. Vaughan Lowe and Christopher Staker, ‘Jurisdiction’ in International Law (Malcolm D Evans ed, 3rd ed OUP 2010) 313, 320; ETO Consortium, ‘Maastricht Principles on Extraterritorial Obligations of States in the Area of Economic, Social and Cultural Rights’ (2013) Principle 25, Commentary 2 (‘Maastricht Principles’). 40 Higgins (n 1) paras 48, 50 and 51. 41 GC 16 (n 3) para 43. 42 Liech v Guat, The Nottebohm Case [1955] ICJ 4, 23 (6 Apr 6); James Crawford, Brownlie’s Principles of Public International Law (8th ed, OUP 2012) 457; RS IV (n 13). 43 Club Resorts Ltd. v Van Breda [2012] SCC 17 (Canada) [2012] [29]. 44 Robert Jennings and Arthur Watts, Oppenheim’s International Law (9th ed, OUP 1992) 457–58. 45 RS IV (n 13) Sec 212. 46 ibid, sec 212, cmt c. 47 UNGPs (n 5) Principle 2 Commentary. 48 RS IV (n 13) 212, cmt c. 49 UK Modern Slavery Act 2015, sec 2, 7(b). 50 RS IV (n 13) sec 214. 38 39

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State jurisdiction over transnational business activity affecting human rights  203 state,51 including its corporations,52 outside its territory.53 Under domestic laws corporations are typically domiciled in the state in which they are incorporated or in which their seat or center of control is located.54 Active personality jurisdiction enables states to implement their duty under the UN Guiding Principles to fulfill “the expectation that all business enterprises domiciled in their territory and/or jurisdiction respect human rights throughout their operations.”55 The broadest example of state practice is the 2017 French “law of vigilance,” which requires large French companies to carry out human rights due diligence over their foreign subsidiaries and suppliers, and to develop and publish a monitoring plan.56 If a company fails to do so and human rights injuries result, the company may be liable for damages.57 A similar proposal is under consideration in Switzerland.58 Active personality jurisdiction over crimes is often limited in state practice to serious crimes. This would not constrain transnational regulation of serious human rights crimes. Moreover, it may be only a matter of comity—respect for the sovereignty interests of the state where the crime was committed—rather than a limit required by international law.59 For lesser human rights violations, where states carry out their duties to cooperate in managing business and human rights challenges,60 comity may actually weigh in favor of transnational regulation.61 3.2.1.3 Universal As noted below,62 certain treaties impose a form of universal jurisdiction by obligating states to prosecute or extradite perpetrators of serious international crimes when found in their territories. In addition, customary international law permits states to exercise “universal jurisdiction” over certain heinous international crimes of universal concern, such as genocide, crimes against humanity, war crimes, certain acts of terrorism, piracy, slavery, and torture, even when there is no specific connection between the crime and the regulating state.63 3.2.1.4 Effects “Effects” jurisdiction exists when conduct outside a state’s territory has a “substantial effect” within its territory.64 Unlike objective territorial jurisdiction, no constituent element of the conduct need take place within the state’s territory; the mere fact of a substantial effect, or even the intent to have a substantial effect, can justify a state’s jurisdiction over foreign conduct.65 ibid, sec 214 cmt c. ibid, sec 214 cmt a. 53 ibid, sec 214. 54 ibid, sec 214 cmt b 55 UNGPs (n 5) Principle 2. 56 Law of Vigilance (n 14) art 4. 57 ibid, art 5. 58 See Ashley Mcintyre, ‘Switzerland Considers Mandatory Human Rights Due Diligence Legislation’ (Assent Blog, 22 June 2018). 59 RS IV (n 13) Sec 214 cmt d and Reporter’s Note 4. 60 UNGPs (n 5) Principle 10 (c). 61 GC 24 (n 10) paras 27, 35; GC 16 (n 3) paras 41, 47. 62 Section 5.3 below. 63 RS IV (n 13) Sec 217 and cmt a. 64 ibid, sec 213. 65 ibid, sec 213 cmts a and c. 51 52

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204  Research handbook on human rights and business Effects jurisdiction is often invoked in regard to economic regulation,66 especially regulation of transnational business conduct or even entirely extraterritorial conduct which produces anti-competitive effects within a state.67 Parallel reasoning suggests that effects jurisdiction might be invoked to regulate transnational conduct resulting in violations of human rights within a state.68 3.2.1.5 Passive personality (“victim protection”) “Passive personality,” or what might be termed “victim protection” jurisdiction, authorizes a state to prescribe law with respect to certain conduct outside its territory that harms its nationals.69 Victim jurisdiction is often applied to conduct which targets the victim precisely because of her nationality. However, “[i]t is less clear whether passive-personality jurisdiction is generally accepted more broadly.”70 3.2.1.6 Protective A sixth form of jurisdiction—based on the “protective principle”—recognizes a state’s authority to regulate conduct by foreign nationals outside its territory that is directed against the security of the state or against a limited class of other fundamental state interests. Examples include counterfeiting a state’s currency, falsifying its official documents, or conspiracy to violate its customs or immigration laws.71 Although this jurisdiction is sometimes viewed as an example of objective territorial or effects jurisdiction, it differs in that no actual or intended effect inside the state’s territory need be shown.72 Protective jurisdiction probably does not currently afford a meaningful basis to regulate human rights violations by transnational corporations. However, the class of protected “fundamental” interests could evolve if states begin to treat the human rights of their peoples as fundamental interests.73 For example, might not a small island state, threatened with inundation due to rising sea levels caused by global warming to which business contributes, assert a fundamental interest in the human right to a sustainable environment?74 3.2.1.7 Recent extensions Under pressures of transnational challenges and public demands, states and international bodies have begun to assert active personality and territorial jurisdiction based on only minimal connections to a state, and to extend universal jurisdiction.

ibid, sec 213 cmt b. ibid, sec 213 Reporter’s Note 2. 68 Effects jurisdiction has recently expanded remarkably in the tax field: eg, Jonathan Pickworth et al, ‘Tax Evasion Knows No Borders’ (White & Case Alert, 1 October 2018). However, this does not appear to hold much relevance for jurisdiction over transnational abuses of human rights. 69 RS IV (n 13) 215. 70 RS IV (n 13) 215 Reporter’s Note 1. 71 RS IV (n 13) Sec 216. 72 ibid, sec 216 Reporter’s Note 1. 73 See Kiobel v Royal Dutch Petroleum Co [2013] 569 US at 127 (Breyer J concurring) (2013) (supporting jurisdiction under Alien Tort Statute where, among other elements, ‘an important American national interest’ is at stake. 74 See UN News, ‘Small Island Nations in Pacific Urge Global Action to Fight Climate Change’, UN News (23 September 2017). 66 67

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State jurisdiction over transnational business activity affecting human rights  205 For example, active personality jurisdiction has now been broadened by the United Kingdom in two respects. The UK Bribery Act 2010 reaches bribery committed entirely outside the UK,75 not only by British citizens, but also by any “individual ordinarily resident” in the UK.76 Both the UK Bribery Act and a provision of the UK Criminal Finances Act 2017 apply to foreign crimes committed, not only by organizations based in the UK, but also by any commercial organization that carries on even “part of a business” in the UK.77 Although these statutes do not address human rights violations, they suggest that a state could enact laws to regulate or prosecute human rights abuses committed by a foreign business outside the state’s territory, so long as the company does part of its business on the state’s territory. The Australia Modern Slavery Act 2018 already requires reports on modern slavery, including acts outside Australia,78 from any business with annual revenues in excess of $100 million that “carries on business in Australia at any time” during the reporting period.79 A “General Comment”80 of the UN Committee on the Rights of the Child opines that states parties to the UN Convention on the Rights of the Child—nearly all states—are obligated to “respect, protect and fulfil” children’s rights affected by an enterprise which conducts “substantial business activities” in the state.81 Likewise, the initial draft of a proposed United Nations treaty on business and human rights would treat a company as domiciled—and thus subject to a state’s active personality jurisdiction—in any state where it has a “substantial business interest.”82 (However, this provision has been criticized by several states.83) Territorial jurisdiction, too, has been extended. The UK Modern Slavery Act 2015 applies to human traffickers who are not UK nationals, so long as “any part” of the arranging or facilitating takes place in the UK.84 Finally, universal jurisdiction has been extended. The US Global Magnitsky Act of 2016 authorizes sanctions against foreign individuals or entities who commit gross violations of human rights against foreign human rights defenders or whistleblowers.85 Already the US has sanctioned foreign business corporations for human rights violations outside the US.86

UK Bribery Act 2010, sec 12(2)(a). ibid, sec 12(4)(g). 77 ibid, sec 7(5)(b) (corporations) and 7(5)(d) (partnerships); UK Criminal Finances Act 2017, sec 46(2)(b). Re US, see Shearman & Sterling, ‘FCPA Digest’, January 2019, 18; US v Hoskins [2018] 902 F 2d 69 (2d Cir 2018). 78 Australia Modern Slavery Act 2018, sec 10. 79 ibid, sec 5(2) and 21 of the Australia Corporations Act 2001. 80 ‘General Comments’ or ‘General Recommendations’ by UN treaty bodies assist states in their progress reports and provide uniform standards. See subsection 5.1.8 below. 81 GC 16 (n 3) para 43. 82 ‘Legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises’ (Zero draft 16 July 2018) Art 5.2.c. See also art 5.2.d. 83 4th session report (n 21) p 18 para 102. 84 UK Modern Slavery Act 2015 (n 49) 2(7)(a). 85 Global Magnitsky Human Rights Accountability Act, 22 Sec USC 2656 (Public Law 2016) 114-328 sec 3(a)(1). See sec 1262(2) and 22 USC 2304(d)(1). 86 US Dept of the Treasury, ‘Issuance of Global Magnitsky Executive Order; Global Magnitsky Designations’, Press Release (21 December 2017). 75 76

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206  Research handbook on human rights and business Several other states have adopted similar laws.87 The EU Ministers of Foreign Affairs recently approved a similar, EU-wide Global Human Rights Sanctions regime, a political decision which now awaits codification in EU legislation.88 The sanctions are generally limited to visa denials and freezes of assets located within a state’s territory,89 powers traditionally possessed by governments. However, to the extent that they assert such powers in response to foreign human rights violations, with no link to the sanctioning state, these laws incrementally expand universal jurisdiction. Moreover, at least the US sanctions—even if not those of other states90—include secondary sanctions. In sanctioning Saudi citizens for the murder of a Saudi journalist in Turkey, the US Treasury Department explained that, not only were their properties in the US blocked, but also ‘U.S. persons are generally prohibited from engaging in transactions with blocked persons, including entities 50 percent or more owned by designated persons’.91 3.2.1.8 A cautionary tale If all states extended their transnational jurisdiction without limit, the result could be conflicting regulations—including some prejudicial to human rights—each with purportedly global reach. An example is the recent expansion of passive personality (or “victim protection”) jurisdiction. The European Union’s General Regulation on Data Protection (“GRDP”) applies to processing of personal data concerning Europeans by data controllers or processors located outside the EU, so long as they offer goods or services to data subjects in the EU,92 or monitor the behavior of Europeans in the EU.93 Since the European Charter of Fundamental Rights treats personal data privacy as a fundamental right,94 the GRDP thus asserts transnational jurisdiction to protect a human right of European victims.95 This can lead to thorny complications, or worse. In 2014 the Grand Chamber of the European Court of Justice (“ECJ”) ruled that an earlier EU privacy directive required Google to remove links and listings of personal data of a Spanish citizen, even though Google’s only presence in Spain was its Spanish promotional and advertising subsidiary, and all data processing was done by Google outside Europe.96 When Google responded by removing links accessible from

See UK House of Commons Library, ‘Briefing Paper 6 July 2018’ (Magnitsky Legislation) 3 (UK) and 4–6 (Canada, Estonia and Latvia). See also ‘Lithuania’s President Signs the Magnitsky Act’, (Lithuanian News 28 November 2017). 88 Ewelina Ochab, ‘The Magnitsky Law Is Taking Over the European Union’ (Forbes 10 December 2018). 89 UK House of Commons (n 87) 4–6. 90 See generally Jeffrey A Mayer, ‘Second Thoughts on Secondary Sanctions’ (2009) 30 University of Pennsylvania Journal of International Law 905, 927–30. 91 US Dept of the Treasury, ‘Treasury Sanctions 17 Individuals for Their Roles in the Killing of Jamal Khashoggi’, Press Release (15 November 2018). 92 Regulation (EU) 2016/679 of the European Parliament and the Council of 27 April 2016, art 2.3(a). 93 ibid, art 2.3(b). 94 26 October 2012, (2000/C 364/01) art 8. 95 ‘The term “fundamental rights” is used in European Union (EU) to express the concept of “human rights” within a specific EU internal context’ accessed 25 January 2019. 96 Court of Justice of the European Union (Grand Chamber, C-131/12, Google 13 May 2014) paras 55, 56, 60, 88, 94 and ruling para 2. 87

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State jurisdiction over transnational business activity affecting human rights  207 Europe but not from other countries, the French national data protection authority asked the ECJ to order removal of the links worldwide.97 The ECJ declined, following the advice of its advocate general, who recommended against the French request.98 He argued in part that imposing the European standard worldwide would confer the same right on other nations, including dictatorships, to impose their own standards worldwide on access to information on the internet, posing a “danger” of censorship of free speech and access to information in Europe and around the globe.99 Already in 2018, a proposed “personal data protection” bill in India, inspired in part by the EU’s GRDP,100 would authorize the government to give its “data protection authority” directions in the interest of the “sovereignty and integrity of India.”101 Expansion of transnational jurisdiction in the field of business and human rights, then, should be undertaken with care, bearing in mind not only its benefits, but also its risks. 3.2.2 Adjudicatory jurisdiction 3.2.2.1 Generally Adjudicatory jurisdiction is arguably permitted in the same circumstances as regulatory jurisdiction (and more). However, international law on adjudicatory jurisdiction is more contested than that on regulatory jurisdiction. But most of these theoretical disagreements have little or no practical effect for purposes of business and human rights. There are at least four positions on the customary international law of permissive adjudicatory jurisdiction. The Lotus rule permits states to exercise jurisdiction unless some rule of international law prohibits them from doing so. The extent of its continuing validity is unclear. Even while criticizing the rule generally and in civil cases, three judges of the International Court of Justice opined in 2002 that the Lotus rule “represents a continuing potential in the context of jurisdiction over international crimes.”102 A second position is the inverse of the Lotus rule. The British and Dutch governments have contended that customary international law bars states from exercising jurisdiction in civil cases unless some specific principle authorizes jurisdiction. They profess to “echo” the views of Australia, Belgium, Canada, France, Germany, and Japan.103 They claim that “it is now widely accepted that an internationally recognized principle must be identified before a State can exercise extraterritorial civil jurisdiction.”104

97 Affaire C-507/17, Google LLC, venant aux droits de Google Inc. cont Commission nationale de l’informatique et des libertés (CNIL). 98 Conclusions De L’avocat Général M Maciej Szpunar présentées le (10 janvier 2019) Judgment (24 September 2019). 99 ibid para 61 and note 33, citing Google Spain et Google (C‑131/12, EU:​C:​2013:​424, point 121).  100 Shushant Jha, ‘India’s Journey to Personal Data Protection and Data Privacy Law’ (IBM Cloud Blog 22 January 2019). 101 The Personal Data Protection Bill, 2018, art 98(1). At this writing, the bill is expected to be formally introduced during 2019. Surabhi Agarwal, ‘Personal Data Protection Bill Only After New Government Takes Over’ (The Economic Times 4 January 2019). 102 Higgins (n 1) paras 48, 50 and 51. 103 ‘Brief of the Governments of the Kingdom of The Netherlands and the United Kingdom of Great Britain and Northern Ireland as Amici Curiae in Support of Neither Party’ in Kiobel v Royal Dutch Shell [2012] US Supreme Court (‘UK/Dutch amicus’) No 10-1491, 3–4. 104 UK/Dutch amicus 11 (footnote omitted), citing inter alia Liech v Guat, the Nottebohm Case [1955] ICJ 4 (Apr 6).

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208  Research handbook on human rights and business A third position appears to deny that there is any applicable rule.105 The American Law Institute (ALI) rejects the Lotus rule, at least for prescriptive jurisdiction.106 Yet the ALI also seemingly rejects the British and Dutch view: except for sovereign immunity, “modern customary international law generally does not impose limits on jurisdiction to adjudicate.”107 A fourth position is suggested by the Maastricht Principles on Extraterritorial Obligations of States in the Area of Economic, Social and Cultural Rights.108 The Maastricht Principles appear to ground adjudicatory jurisdiction, not entirely on customary international law, but on general principles of law.109 Which position one favors does not seem to make much difference in practice. Even the British/Dutch view, that some principle of international law must be shown to justify transnational jurisdiction, accepts the bases of jurisdiction under customary international law,110 as well as the broad principle that states may adjudicate transnational corporate conduct whenever there is a “genuine connection” between the conduct and the state.111 To date, adjudications of alleged human rights abuses by transnational companies rely mainly on active personality jurisdiction: foreign claimants sue companies in their home states, for example, in Canada,112 Germany,113 The Netherlands,114 the UK,115 and the US.116 The main disagreement involves civil claims brought under universal jurisdiction. The British and Dutch governments argue that “there is no evidence that states have recognized or given effect to an international law obligation to exercise universal jurisdiction” over civil claims.117 However, this view is contradicted by the European Commission. The EC maintains that “universal civil jurisdiction is consistent with international law if confined by the limits in place for universal criminal jurisdiction.”118 The EC points out that in Europe and elsewhere, civil claims may often be brought “within criminal proceedings based on universal jurisdiction.”119 The EC also notes that no state has objected to the US assertion of universal

RS IV (n 13) Part III, Introductory Note. ibid, sec 211, Reporter’s Note 1. 107 ibid, Part III, Introductory Note and sec 301–06. 108 Maastricht Principles (n 39). 109 See sec 5.4 below. 110 UK/Dutch amicus (n 103) 12–13. 111 ibid, 11; RS IV Sec 211 and Reporter’s Note 2. 112 Eg, Choc v Hudbay Minerals [2013] ONSC 1414; Araya v Nevsun Resources [2020] SCC 5; Das v George Weston Ltd [2017] ONCA 1053; Garcia v Tahoe Resources [2017] BCCA 39, leave to appeal denied by Supreme Court of Canada, 8 June 2017 in docket no 37492. 113 Lliuya v RWE AG, Judgment [2017] Essen Higher Regional Court [30 November 2017]. 114 Akpan v Royal Dutch Shell, Judgment [2015] Court of Appeal of The Hague [17 December 2015] ECLI:​NL:​GHDHA:​2015:​3586 (Dooh/Shell); ECLI:​NL:​GHDHA:​2015:​3587 (Shell/Akpan); ECLI:​NL:​ GHDHA:​2015:​3588 (Oguru-Efanga/Shell); See Cees van Dam, ‘Preliminary judgments Dutch Court of Appeal in the Shell Nigeria Case’ accessed 30 January 2019. 115 Eg, Vedanta (n 15); Okpabi (n 12). 116 Eg, Doe v Nestle [2018] 906 F 3d 1120 (9th Cir 2018); Al Shimari v CACI [2018] 320 F Supp 3d 781 (E.D. Va. 2018). Petitions for Supreme Court review were pending in both cases as of March 2020. 117 UK/Dutch amicus (n 103) 20. 118 ‘Brief of the European Commission on Behalf of the European Union as Amici Curiae in Support of Neither Party’ in Kiobel v Royal Dutch Shell [2012] US Supreme Court, No 10-1491 (‘EC amicus’) 17. 119 EC amicus 18–19. 105 106

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State jurisdiction over transnational business activity affecting human rights  209 jurisdiction over civil claims for torture and extrajudicial executions under the Torture Victims Protection Act.120 It further notes that EU regulations and some European national laws permit the exercise of universal civil jurisdiction in some circumstances, and that all EU states are obligated to recognize and enforce the resulting judgments.121 The ALI rightly observes, then, that “the permissibility and limits of universal civil jurisdiction remain controversial.”122 3.2.2.2 Jurisdiction by necessity (forum necessitatis) Even absent the “reasonable link” ordinarily required to exercise adjudicatory jurisdiction, state practice mainly in civil law countries supports transnational jurisdiction in cases of extreme necessity, at least where two criteria are met.123 First, as stated by an EU Council regulation, “the courts of a Member State may, on an exceptional basis, hear the case if proceedings cannot reasonably be brought or conducted or would be impossible in a third State with which the dispute is closely connected.” Second, “The dispute must have a sufficient connection with the Member State of the court seised.”124 Neither criterion is defined with precision. What does it mean that proceedings “cannot reasonably be brought” elsewhere? And what is a “sufficient connection”? By definition it must be less than the “reasonable link” ordinarily required for jurisdiction; otherwise there would be no need to invoke forum necessitatis. It might include temporary residence of the plaintiff or the presence of property in the forum state, or the presence in the forum state of a corporate parent or subsidiary of the defendant corporation.125 The EU Agency for Fundamental Rights recommends that the EU “encourage clarity on how and when forum necessitatis … applies.”126 The EU could “incentivise Member States to ensure a more harmonized application.”127 The Committee of Ministers of the Council of Europe recommends that member states consider asserting jurisdiction over civil claims for human rights abuses by business enterprises not domiciled in their territories, “if no other effective forum guaranteeing a fair trial is available (forum necessitatis) and there is a sufficiently close connection to the member State concerned.”128 Forum necessitatis jurisdiction or its equivalent is in any event reportedly authorized by statute or jurisprudence in at least 25 states.129 An expert study deems it a “general principle of

ibid 22. ibid 23–26. 122 RS IV (n 13) Sec 211 cmt d. 123 Nait-Liman v Switzerland, Judgment [2018] App no 51357/07, Eur Ct H Rts [15 March 2018] (Grand Chamber), paras 88–89, 199–216. 124 EU Council Regulation (EC) No. 4/2009) art 7. See also Nait-Liman v Switzerland (n 123) paras 91–93. 125 Chilenye Nwapi, ‘Jurisdiction by Necessity and the Regulation of the Transnational Corporate Actor’ (2014) 30(78) Utrecht Journal of International and European Law 24 (‘Nwapi’) 34–35; UK/Dutch amicus (n 103) 22 note 36. 126 EU Agency for Fundamental Rights, FRA Opinion 1-2017 [B&HR], Vienna, 10 April 2017, FRA Opinion 4, 8. 127 ibid. 128 Council of Europe, ‘Recommendation CM/Rec(2016)3 of the Committee of Ministers (‘COE’) (2016), IV.36. 129 Nwapi (n 125) 32; see also Nait-Liman v Switzerland (n 123) para 85. 120 121

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210  Research handbook on human rights and business public international law.”130 Although not generally recognized in common law countries,131 forum necessitatis may afford access to justice in civil law states for foreign human rights violations, even where ordinary rules of jurisdiction would not apply.

4.

RECOMMENDED TRANSNATIONAL JURISDICTION

Many international instruments and bodies not only permit but generally encourage states to exercise regulatory and adjudicatory jurisdiction over the impacts of their transnational businesses on human rights. The most global and perhaps influential is Principle 2 of the UN Guiding Principles. It recommends: “States should set out clearly the expectation that all business enterprises domiciled in their territory and/or jurisdiction respect human rights throughout their operations.” The Commentary asserts “strong policy reasons” for this, including “predictability for business enterprises by providing coherent and consistent messages, and preserving the State’s own reputation.” The Commentary notes that steps already taken by states range from global reporting requirements for parent companies, to performance standards imposed by institutions that support overseas investments, to criminal prosecutors based solely on the nationality of the perpetrator. An important global instrument encouraging governments to regulate multinational enterprises in the field of labor rights is the International Labor Organization’s Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy.132 Other international instruments are directed to business, such as the OECD Guidelines for Multinational Enterprises.133 They make clear that home states look to the entire global business enterprise, and not merely to the parent company incorporated in an OECD state. The Guidelines extend to enterprise groups, although boards of subsidiary enterprises might have obligations under the law of their jurisdiction of incorporation. Compliance and control systems should extend where possible to these subsidiaries. Furthermore, the board's monitoring of governance includes continuous review of internal structures to ensure clear lines of management accountability throughout the group.134

UN human rights treaty bodies and rapporteurs have made numerous recommendations to states to exercise regulatory jurisdiction over the transnational business activities of their companies.135 Observing that states are obligated to safeguard the rights of children affected by the transnational activities of their companies, the UN Committee on the Rights of the Child recommended that states afford jurisdictional remedies “for children and their families whose

Arnaud Nuyts, ‘Study of Residual Jurisdiction: Review of the Member States’ Rules concerning the “Residual Jurisdiction” of Their Courts in Civil and Commercial Matters pursuant to the Brussels I and II Regulations’ (3 September 2007) 64. 131 Nait-Liman v Switzerland (n 123) para 90. 132 Revised 2017. 133 OECD (n 18) Foreword 3. 134 ibid, Commentary on General Policies, para 9. 135 See ESCR-Net, ‘Global Economy, Global Rights: A Practitioner’s Guide for Interpreting Human Rights Obligations in the Global Economy’ (2014). 130

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State jurisdiction over transnational business activity affecting human rights  211 rights have been violated by business enterprises extraterritorially when there is a reasonable link between the State and the conduct concerned.”136 Regional organizations have made valuable recommendations. The Committee of Ministers of the Council of Europe encourages the Council’s 47 member states to regulate and adjudicate transnational business activities.137 Member states should require their business enterprises to respect human rights and to apply human rights due diligence “throughout their operations abroad.”138 States should “ensure” jurisdiction over civil claims against their own companies for human rights abuses, without applying the doctrine of forum non conveniens,139 and should “consider” granting their courts jurisdiction over civil claims against foreign subsidiaries when those claims are “closely connected” with claims against the European parent companies.140

5.

OBLIGATORY TRANSNATIONAL JURISDICTION

States may be obligated to exercise jurisdiction over transnational business activities by human rights treaties, treaties on universal jurisdiction, other regional treaties, and, arguably, by general principles of law. 5.1

Human Rights Treaties

States parties to general human rights treaties accept not only negative obligations to refrain from violating human rights, but also positive obligations to take reasonable measures to ensure respect for human rights.141 The negative obligations are generally referred to as a state’s duty to “respect” human rights, whereas the positive obligations reflect its duties to “ensure,” “protect,” or “fulfill” human rights.142 The positive obligation to protect “will only be fully discharged if individuals are protected by the State … also against acts committed by private persons or entities that would impair the enjoyment of Covenant rights in so far as they are amenable to application between private persons or entities.”143 But do a state’s jurisdiction and obligations to protect persons from human rights infringements by business extend beyond its territory? Treaty language varies. Depending on the treaty, a state party may be obligated to respect and ensure human rights: ●● to all individuals “within its territory and subject to its jurisdiction,”144 ●● “in any territory under its jurisdiction,”145 GC 16 (n 3) para 44. COE (n 128). 138 ibid paras 13 and 20. 139 ibid para 34. 140 ibid para 35. 141 Eg, UN Human Rights Committee, ‘General Comment No 31’ (UN doc, CCPR/C/21/Rev1/Add 13 (‘GC 31’) 2004) paras 6–7. 142 ibid. 143 ibid para 8. 144 International Covenant on Civil and Political Rights (‘ICCPR’) (19 December 1966, in force, 23 March 1976, 999 UNTS 171) art 2.1. 145 Convention against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment (‘CAT’) (10 December 1984, in force 26 June 1987, 1465 UNTS 85) art 2.1. 136 137

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212  Research handbook on human rights and business ●● ●● ●● ●●

“to everyone within their jurisdiction,”146 to “all persons subject to their jurisdiction,”147 to “all individuals subject to its jurisdiction,”148 or subject to no general territorial or jurisdictional limiting clause at all.149

There are at least six positions on the territorial scope of state obligations under human rights treaties, ranging from no “extraterritorial” jurisdiction to obligatory global jurisdiction. The differences are due in part to varying treaty language, and in part to differing interpretations. 5.1.1 No extraterritorial responsibility The narrowest position has been asserted by at least Canada,150 Israel,151 and the United States.152 Focusing on the undertaking of each state party to the International Covenant on Civil and Political Rights (ICCPR) to respect and ensure rights to individuals “within its territory and subject to its jurisdiction,”153 they contend that their ICCPR duties apply only where both conditions—territory and jurisdiction—are simultaneously met.154 Under their reading, a state’s jurisdiction and obligations of protection under the ICCPR can never extend outside its territory. 5.1.2 Both territorial and jurisdictional responsibilities Their position is rejected by the UN Human Rights Committee,155 and by the International Court of Justice (“ICJ”).156 These bodies interpret the ICCPR to impose duties on states not only within their territories, but also within their jurisdiction, which sometimes extends outside their territory (such as the US possession of Guantanamo or Israel’s occupation of Palestinian Territories).157

146 European Convention for the Protection of Human Rights and Fundamental Freedoms, 4 November 1950, entered into force, 3 September 1953 (Council of Europe Treaty 005) Art 1. 147 American Convention on Human Rights (OAS Treaty Series No 36, 22 November 1969, in force 18 July 1978) art 1.1. 148 Arab Charter on Human Rights (22 May 2004, in force, 16 March 2008, 12 Int’l H Rts Rep 893, 2005) art 3.1. 149 African Charter on Human and Peoples’ Rights (1 June 1981, in force, 21 October 1986, 21 ILM 58, 1982), as well as the UN human rights treaties discussed in subsection 5.1.5 below. 150 Human Rights Committee, ‘Draft General Comment No. 36’ (Comments by the Government of Canada 23 October 2017) para 7. 151 See Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Adv Op [2004] ICJ Reports [2004] 136 (‘ICJ Adv Op’) para 110. 152 See Human Rights Committee, Concluding observations (UN Doc CCPR/C/USA/C)/4, 23 April 2014) para 4; see also Marko Milanovic, ‘Harold Koh’s Legal Opinions on the US Position on the Extraterritorial Application of Human Rights Treaties’ European Journal of International Law: Talk! (7 March 2014); Observations of the United States of America on the Human Rights Committee’s Draft General Comment No 36, 6 October 2017, para 13. 153 ICCPR (n 144) art 2.1. 154 See nn 150–52. 155 GC 31(n 141) para 10. 156 ICJ Adv Op (n 151) paras 107–11. 157 ibid; Congo v Uganda [2005] ICJ Reports [2005] 168, para 219.

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State jurisdiction over transnational business activity affecting human rights  213 Still, these ICCPR duties remain textually limited to persons “subject to [a state party’s] jurisdiction.”158 The Human Rights Committee in 2004 interpreted this to recognize jurisdiction only over persons “within the power or effective control of that State Party, even if not situated within the territory of the State Party.”159 A similar test for jurisdiction—requiring power or effective control over either the person or the territory—has been adopted by the European Court of Human Rights.160 Thus constrained, these interpretations do little to require states to regulate the global activities of companies. 5.1.3 Recommended global responsibility Following the adoption of the UN Guiding Principles in 2011,161 the UN Human Rights Committee expanded its approach. In 2012, in language echoing that of the Guiding Principles,162 the Committee “encouraged” Germany to “set out clearly the expectation that all business enterprises domiciled in its territory” respect human rights “throughout their operations.”163 It further “encouraged” Germany “to strengthen the remedies provided to protect people who have been victims of activities of such business enterprises operating abroad.”164 The Committee took a similarly expansive view in 2015 in regard to alleged human rights abuses by Canadian mining companies operating abroad.165 5.1.4 “Impact” or “effects” jurisdiction In 2001 the European Court of Human Rights ruled that the “effects” of actions by European states on persons they allegedly bombed in Serbia—killing them—did not bring the victims within the “jurisdiction” of member states of the European Convention on Human Rights.166 More recently, however, three human rights bodies—the UN Human Rights Committee, the African Commission on Human and Peoples’ Rights, and the Inter-American Court of Human Rights—have taken the view that where activities within a state produce an “impact” or “effect” on the right to life of persons elsewhere, those persons are within the state’s jurisdiction for purposes of its treaty obligation to protect their human rights. This new jurisprudence differs from traditional “effects” jurisdiction, by which a state may assume jurisdiction over foreign acts which affect the state. Under this new jurisprudence, a state party to a human rights treaty must assume jurisdiction over acts in its territory which have an “impact” or “effect” on the right to life in other states. The new jurisprudence can thus be read to obligate states to take positive measures to ensure that their companies do not make

ICJ Adv Op (n 151) paras 107–11. GC 31 (n 141) para 10. 160 Eg, Al-Skeini v UK, Judgment [2011] app no 55721/07 (Grand Chamber), paras 131–40. 161 UN Human Rights Council Res 17/4 (UN Doc A/HRC/17/L.17/Rev.1 15 June 2011) para 1, endorsing UNGPs. 162 UNGP (n 5) Principle 2. 163 Concluding Observations (CCPR/C/DEU/CO/6, 2012) para 16; compare UNGP (n 5) Principle 2. 164 Concluding Observations (n 163). 165 Concluding Observations (UN Doc CCPR/C/CAN/CO/6, 13 August 2015). See ‘Responsible Business Conduct Abroad – Questions and Answers accessed 20 May 2019. 166 Bankovic v Belgium et al, Decision on Admissibility [2001] app no 52207/99, Grand Chamber [12 December 2001] paras 54, 82. 158 159

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214  Research handbook on human rights and business decisions or take actions within their territories which endanger the lives of persons in other states. 5.1.4.1 UN Human Rights Committee Over the objections of several states,167 the UN Human Rights Committee in 2018 recognized that a state’s jurisdiction extends to “persons located outside any territory effectively controlled by the State, whose right to life is nonetheless impacted by its … activities in a direct and reasonably foreseeable manner.”168 5.1.4.2 African Commission on Human and People’s Rights The African Charter on Human and People’s Rights contains no territorial or jurisdictional clause limiting the obligations of states parties. In 2015 the African Commission on Human and People’s Rights declared that a state party must respect the right to life of individuals “outside its territory” in three circumstances.169 Two of these—where the state exercises effective authority, power, or control over (1) the person or (2) the territory—echo the earlier jurisprudence of other human rights bodies. However, the third circumstance amounts to an “impact” test: a state must respect the right to life of individuals outside its territory where the state “engages in conduct which could reasonably be foreseen to result in an unlawful deprivation of life.”170 Such conduct can include a state’s failure to exercise due diligence to prevent unlawful deprivations of life by nonstate actors.171 This language may thus be read to obligate a state to exercise due diligence to prevent its companies from acting in ways that foreseeably impact the right to life of individuals outside the state’s territory. 5.1.4.3 Inter-American Court of Human Rights At least in environmental matters, the Inter-American Court of Human Rights now bases jurisdiction even more broadly on effects. In 2017 the Court interpreted the “jurisdiction” of a state party to the American Convention on Human Rights to encompass jurisdiction over persons outside its territory who suffer human rights violations caused by activities within the territory or effective control of the state, including activities carried out by non-state actors.172 Such persons are within the state’s jurisdiction because of the “effect” on their rights.173 A human rights violation outside a state’s territory is within the state’s jurisdiction so long as there exists a causal relationship between an act within its territory and an impact on human

See Daniel Mogster, ‘Towards Universality: Activities Impacting the Enjoyment of the Right to Life and the Extraterritorial Application of the ICCPR’ European Journal of International Law: Talk! (27 November 2018). 168 UN Human Rights Committee, ‘General Comment 36’ (UN Doc CCPR/C/GC/36, 30 October 2018) para 63. 169 General Comment No 3 On The African Charter On Human And Peoples’ Rights (2015), para 14. 170 ibid. 171 ibid para 9. 172 Int-Am Ct Human Rts, Adv Op 23-17 (2017) (‘Adv Op 23’), paras 95, 101, 102, 104c and 104h (translations herein are unofficial by author). 173 ibid para 101 (‘afectación’). 167

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State jurisdiction over transnational business activity affecting human rights  215 rights outside its territory.174 This is because the state of origin has “effective control” over activities in its territory and can prevent their causing “transborder harm.”175 The legal implications are both jurisdictional and substantive: “The possible victims of the negative consequences of these activities are within the jurisdiction of the state of origin, for purposes of the possible responsibility of the state for failure to comply with its obligation to prevent transborder harm.”176 The Court drew a line between a state’s broad transnational jurisdiction and its narrower transnational responsibility (in the sense of accountability). Jurisdiction exists whenever activities within a state’s territory cause an effect on human rights—all human rights—outside its territory. A state’s responsibility, by contrast, is much narrower.177 Even while recognizing that environmental impacts can affect many other human rights,178 the Court confined its discussion of state responsibility to the impacts on the human rights to life and personal integrity, including the impacts of transnational business activities on access to and quality of water, food, health, and environmental protection.179 States parties to the Convention are obligated to respect and ensure the human rights of all persons within their jurisdiction, even if those persons are located outside their territory.180 States must take all measures necessary to prevent activities in their territory or under their control from affecting the human rights of persons outside their territories.181 A state may incur international responsibility for the conduct of third parties (such as business corporations) as a result of the state’s failure to regulate, supervise, or monitor their activities causing damage to the environment.182 However, states should not be held to assume disproportionate or impossible burdens.183 A state’s responsibility for transnational business harm to the environment arises only where the authorities (1) knew or should have known at the time of (2) a real and (3) immediate risk to (4) the life (or, presumably, personal integrity) of (5) an individual or a group of specific individuals, and (6) failed to take necessary measures within their powers, (7) that could reasonably be expected to prevent or avoid the risk, where (8) there is a causal relation between the effect on life or personal integrity and (9) the significant harm to the environment resulting from the transnational business activity.184 If these conditions are met, the state is responsible regardless of whether the original act was lawful.185 While these conditions for a state’s responsibility may seem rigorous, recall that the scope of a state’s jurisdiction and its duty to prevent harm—over all persons whose human rights

ibid para 101. ibid para 102. 176 ibid para 51. 177 ibid. 178 ibid para 69. 179 ibid para 109. The Court confined its discussion to respond to the scope of the request. Ibid paras 38, 105–06, 125. 180 ibid para 104 c. 181 ibid paras 101 and 104 g. 182 ibid para 119. 183 ibid para 120. 184 ibid para 120. 185 ibid para 103. 174 175

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216  Research handbook on human rights and business are affected by activities originating within the state, even those outside its territory—is far broader. 5.1.5 No territorial or express jurisdictional limitation Some human rights treaties have no clause expressly limiting the territorial or jurisdictional undertakings of states. The ICJ has found no territorial limitation in the International Covenant on Economic, Social and Cultural Rights;186 the Convention on the Rights of the Child;187 the Optional Protocol on the Rights of the Child on the involvement of children in armed conflict;188 the state duty to prevent genocide under the Genocide Convention;189 and, at least prima facie, the Convention Against Race Discrimination.190 However, this does not mean that states parties to these treaties have limitless global responsibilities. Each of these cases involved a military occupation or a state’s actions during an armed conflict in a neighboring state. It is not clear how much further, if at all, the ICJ would extend state responsibilities under these treaties. There is likewise no express territorial or jurisdictional limitation in the Convention on the Elimination of All Forms of Discrimination Against Women (“CEDAW”).191 5.1.6 Obligatory global responsibility Finally, some treaty bodies now interpret human rights treaties to obligate states to regulate their companies in order to prevent them from violating human rights anywhere.192 This is a step forward from the UN Guiding Principles adopted in 2011. The Commentary to Principle 2 stated: “At present States are not generally required under international human rights law to regulate the extraterritorial activities of businesses domiciled in their territory and/or jurisdiction. Nor are they generally prohibited from doing so, provided there is a recognized jurisdictional basis.”193 “Within these parameters,” the Commentary acknowledged, “some human rights treaty bodies recommend that home States take steps to prevent abuse abroad by business enterprises within their jurisdiction.”194 The international legal landscape has evolved considerably since 2011. At least three UN human rights treaty bodies—the Committee on the Rights of the Child (“CRC”) in 2013;195 the

186 ICJ Adv Op (n 151) para 112, concerning the International Covenant on Economic, Social and Cultural Rights (16 December 1966, in force 3 January 1976, 993 UNTS 3). 187 ibid, para 113; Congo v Uganda (n 157) para 219, concerning Convention on the Rights of the Child (‘CRC’) (20 November 1989, in force 2 September 1990, 1577 UNTS 3). 188 Congo v Uganda (n 157) para 219, concerning the Optional Protocol (25 May 2000, in force 12 February 2002, 2173 UNTS 222). 189 Application of the Convention on the Prevention and Punishment of the Crime of Genocide, Judgment [2007] ICJ Reports [2007] 43, para 183 (duty to prevent); compare para184 (duty to punish). 190 Application of the International Convention on the Elimination of all Forms of Racial Discrimination, Provisional Measures, Order of [2008] ICJ Reports [2008] 353, paras 109, 117. 191 CEDAW (Adopted 18 December 1979, in force 3 September 1981, 1249 UNTS 13). See subsection 5.1.6.3 below. But complaints under the Optional Protocol may be brought only by persons ‘under the jurisdiction’ of the state party. Optional Protocol to CEDAW (10 December 1999, in force 22 December 2000, 2131 UNTS 83) art 2. 192 GC 24 (n 10) para 26; GC 16 (n 3) para 43. 193 UNGPs (n 5) Principle 2, Commentary. 194 ibid. 195 GC 16 (n 3).

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State jurisdiction over transnational business activity affecting human rights  217 Committee on Economic, Social and Cultural Rights in 2011 and 2017;196 and the CEDAW Committee in 2018197—now affirm that states parties are obligated to regulate the transnational activities of their companies. 5.1.6.1 Rights of the child The UN Convention on the Rights of the Child obligates states parties to respect and ensure its rights to each child “within their jurisdiction.”198 In 2013 the CRC opined that home states are obligated to safeguard the rights of children outside their territories who are affected by the transnational activities of their companies, “provided that there is a reasonable link between the State and the conduct concerned. A reasonable link exists when a business enterprise has its center of activity, is registered or domiciled, or has its main place of business or substantial business activities in the State concerned.”199 The Committee has followed up in its Concluding Observations on the periodic reports of states such as France,200 Ireland,201 Kenya,202 Switzerland,203 and the UK.204 5.1.6.2 Economic, social, and cultural rights In 2011 the UN Committee issued a statement that states parties to the International Covenant on Economic, Social and Cultural Rights are required, without infringing on the sovereignty or diminishing the obligations of host states under the Covenant, to take the necessary steps to prevent their companies from committing human rights violations abroad.205 In 2017 the Committee expanded on its rationale for this obligation.206 First, the Covenant contains no express jurisdictional limitation on the obligations of states parties.207 Second, the Covenant should be interpreted in light of the duties of international cooperation imposed on states parties by the Covenant and the UN Charter, duties expressed without any territorial limitation.208 Third, the ICJ “has acknowledged the extraterritorial scope of core human rights treaties.”209 And fourth, customary international law “prohibits a State from allowing its territory to be used to cause damage on the territory of another State.”210 The Committee clarified that “extraterritorial obligations under the Covenant arise when a State Party may influence situations located outside its territory, consistent with the limits

GC 24 (n 10) paras 25–37, citing also E/C.12/2011/1, paras 5–6. CEDAW Committee, ‘General Recommendation No 37’ (UN Doc CEDAW/C/GC/37, 13 March 2018) para 43. 198 CRC (n 187) art 2. 199 GC 16 (n 3) Para 43 (footnote omitted). 200 Concluding Observations (UN Doc CRC/C/FRA/CO/5, 23 February 2016) paras 21–22. 201 Concluding Observations (UN Doc CRC/C/IRL/CO/3-4, 1 March 2016) paras 23–24. 202 Concluding Observations (UN Doc CRC/C/KEN/CO/3-5, 21 March 2016) paras 19–20. 203 Concluding Observations (UN Doc CRC/C/CHE/CO/2-4, 26 February 2015) paras 22–23. 204 Concluding Observations (UN Doc CRC/C/GBR/CO/5, 12 July 2016) para 19. 205 E/C,12/2011/1, paras 5–6, in regard to the Covenant (n 186). 206 GC 24 (n 10) paras 25–37. 207 ibid para 27. 208 ibid. 209 ibid citing ICJ Adv Op (n 151) paras 109–12. See discussion below. 210 GC 24 (n 10), citing Res 21/11, A/HRC/21/39, para 92. 196 197

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218  Research handbook on human rights and business imposed by international law, by controlling the activities of corporations domiciled in its territory and/or jurisdiction.”211 The transnational obligations of states parties apply to the foreign activities of “business entities over which they can exercise control,”212 including “corporations incorporated under their laws, or which have their statutory seat, central administration or principal place of business on their national territory.”213 States should also require their corporations to use their “best efforts” to ensure that entities whose conduct they may influence, such as subsidiaries or business partners, respect Covenant rights. Companies should be required to act with due diligence to identify, prevent, and address abuses to rights by such subsidiaries and business partners, “wherever they may be located.”214 The Committee “underline[d] that, although the imposition of such due diligence obligations does have impacts … outside these States’ national territories … this does not imply the exercise of extraterritorial jurisdiction.”215 This Committee followed up in its Concluding Observations on periodic reports under the Covenant by such states as Australia,216 Germany,217 Korea,218 Mexico,219 the Netherlands,220 New Zealand,221 and Spain.222 5.1.6.3 Women’s rights CEDAW obligates states parties “[t]o take all appropriate measures to eliminate discrimination against women by any … enterprise.”223 It has no clause limiting its territorial or jurisdictional reach. Nonetheless, in 2010, the CEDAW Committee appeared to adopt the ICCPR “effective control” test.224 Since then, the CEDAW Committee has either incrementally abandoned, or at least broadly interpreted, this seemingly restrictive language. In 2017 it noted that “gender-based violence against women can result from acts or omissions of State or non‑State actors, acting territorially or extraterritorially, including … extraterritorial operations of private corporations.”225 In 2018 it declared, “States parties have obligations both within and outside their territories to ensure the full implementation of the Convention.”226 Recent Concluding Observations by the Committee make no mention of “effective control.” They obligate states to regulate the transnational activities of their companies which adversely

GC 24 (n 10) para 28 (citations omitted). ibid para 30. 213 ibid. 214 ibid para 33 (citation omitted). 215 ibid. 216 UN Doc E/C12/AUS/CO/5, 11 July 2017, paras 13–14. 217 UN Doc E/C12/DEU/CO/6, 27 November 2018, paras 8–9. 218 UN Doc E/C12/KOR/CO/4, 29 October 2017, paras 17–19. 219 UN Doc E/C 12/MEX/CO/5-6, 17 April 2018, paras 10–11. 220 UN Doc E/C 12/NLD/CO/6, 6 July 2017, paras 11–13. 221 UN Doc E/C 12/NZL/CO/4, 1 May 2018, paras 16–18. 222 Eg, UN Doc E/C 12/ESP/CO/6, 25 April 2018, paras 8–10. 223 CEDAW (n 191) art 2 (e). 224 ‘General Recommendation No 28’ (UN Doc CEDAW/C/GC/28, 2010) para 12. 225 ‘General Recommendation No 35’ (UN Doc CEDAW/C/GC/35, 26 July 2017) para 20. 226 ‘General Recommendation No 37’ (UN Doc CEDAW/C/GC/37, 13 March 2018) para 43. 211 212

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State jurisdiction over transnational business activity affecting human rights  219 affect women and girls who are not within the state’s control, in territories also not within its effective control.227 5.1.7 Legal force of human rights treaty interpretations In 1994 the UN Human Rights Committee asserted that it “necessarily falls to the Committee to determine whether a specific reservation is compatible with the object and purpose of the Covenant.”228 Human rights treaties incorporate, not reciprocal commitments by states, but objective obligations, which the Committee is not only well suited, but indeed required, to interpret in order to perform its mandated functions.229 The US objected, arguing that the Covenant “does not impose on States Parties an obligation to give effect to the Committee’s interpretations or confer on the Committee the power to render definitive or binding interpretations.”230 The UK agreed.231 In 2017 the US reiterated its position,232 while the UK refrained from commenting.233 There is no mechanism to resolve such a dispute. The least that can be said is the UK’s observation that Committee General Comments “command great respect.”234 The Inter-American Court holds that states parties to the American Convention are obligated to apply its interpretations of the Convention.235 Although some national courts have refused to do so, their noncompliance does not seem to distinguish between judgments against their state in contentious cases, where the American Convention explicitly requires compliance,236 and advisory opinions.237 5.2

European Union Jurisdiction

State jurisdiction over transnational business and human rights may also be shaped by instruments not specifically focused on human rights. Under the European Union’s 2012 Recast Brussels Regulation, persons domiciled in an EU member state “shall, whatever their nationality, be sued in the courts of that Member State.”238 Since the Regulation applies to UN Docs CEDAW/C/AUS/CO/8, 25 July 2018, para 29(b) (Australia); CEDAW/C/DEU/CO/7-8, 9 March 2017, para 15 (Germany); CEDAW/C/CAN/CO/8-9, 25 November 2016, para 18 (Canada); CEDAW/C/CHE/4-5, 25 November 2016, paras 16(c) and 40(c) (Switzerland). 228 ‘General Comment 24’ (UN Doc. CCPR/C/21/Rev/1/Add.6, 11 November 1994) para 18. 229 ibid. 230 ‘Observations by the United States of America on General Comment 24 (52)’ (28 March 1995, 1, in UN Doc A/50/40, 28 March 1995) 1. 231 ‘Observations by the United Kingdom on General Comment 24’ (21 July 1995, para 1, UN Doc A/50/40). 232 Observations of the United States of America on the Human Rights Committee’s on Draft General Comment No 36 (6 October 2017) para 5. 233 Human Rights Committee Draft General Comment No 36, ‘Comments of the Government of the United Kingdom of Great Britain and Northern Ireland’ (6 October 2017). 234 ibid. 235 Int-Am Ct Human Rts, Adv Op [2014] OC-21/14, (ser A) No 21, para 31. 236 American Convention, art. 68.1. 237 Gelman v Uruguay, Supervision of Compliance with Judgment [2013] Int-Am Ct Human Rts, Resolution of 20 March 2013, para 52. 238 Regulation (EU) No 1215/2012 of The European Parliament and of The Council of 12 December 2012 (‘Recast Brussels Regulation’), art 4.1. Some EU member states are not covered by the Regulation. See its Preamble, para 9. 227

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220  Research handbook on human rights and business legal persons,239 EU member states are obligated to accept jurisdiction over suits against their companies for human rights violations committed entirely or partly outside Europe. Jurisdiction over a European company’s foreign subsidiaries or business partners is more complicated. European jurisdiction over a company not domiciled in Europe is governed by the law of each EU member state.240 England, for example, permits suits against a foreign subsidiary or business partner in certain circumstances.241 In such cases, English courts have jurisdiction over both companies.242 There is no need to sue the two companies in different suits in different countries. However, if one or more circumstance is not present, there is no English jurisdiction over the subsidiary or business partner.243 Even a foreign subsidiary wholly owned by an English company cannot then be sued in England, even if assistance of counsel may not be practically available in the foreign jurisdiction or the foreign courts lack independence.244 5.3

Universal Jurisdiction Treaties

States are obligated to establish jurisdiction and to prosecute or extradite violators of such “universal jurisdiction” treaties as the Convention against Torture,245 the Convention against Forced Disappearances,246 and the Optional Protocol to the Convention on the Rights of the Child on the sale of children, child prostitution, and child pornography.247 Similar provisions are found in regional treaties.248 The Optional Protocol on children’s rights is illustrative. Regardless of whether offenses under the treaty take place within or outside their territory, states parties are obligated to establish jurisdiction and to prosecute or extradite violators who are their nationals, or who victimize their nationals, or who are simply found within their territory.249 States are thus obligated to prosecute (or may instead extradite) business persons involved in the exploitation of children. With regard to business entities, “Subject to the provisions of its national law, each State Party shall take measures, where appropriate, to establish the liability of legal persons … Subject to the legal principles of the State Party, such liability of legal persons may be criminal, civil or administrative.”250 Comparable Council of Europe treaties parallel the UN Protocol in obligating states to impose liability on legal persons, whether criminal, civil, or administrative. However, they obligate states to hold a legal person liable only where an offense is committed for its benefit ibid, preamble, para 15. ibid art 6.1. 241 Vedanta (n 15) para 20. 242 ibid. 243 This was in fact the result in Okpabi (n 12). 244 Vedanta (n 15) para 20. 245 CAT (n 145) arts 5, 7.1. 246 Convention against Forced Disappearances (Adopted 20 December 2006, in force 23 December 2010, 2716 UNTS 3) arts 9.2, 10, 11.1, 24.4, 24.5. 247 Convention on the Rights of the Child on the sale of children, child prostitution and child pornography (Adopted 25 May 2000, in force 18 January 2002, 2171 UNTS 227) arts 3.1, 3.4, 4.3. 248 Eg, Council of Europe Conventions on human trafficking (CETS No. 197), art 31; Protection of children (CETS No 201), art 25; and Violence against women (CETS No 210), art 44. 249 Optional Protocol (n 247) arts 3.1, 3.4, 4.3. 250 ibid art 3.4. 239 240

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State jurisdiction over transnational business activity affecting human rights  221 by a natural person who holds a “leading position within the legal person.”251 The UN conventions on torture and forced disappearances impose similar jurisdictional and prosecutorial obligations only with respect to natural persons, not legal persons. The preceding discussion relates principally to universal criminal jurisdiction and prosecution. Universal civil jurisdiction was discussed earlier.252 Neither customary international law,253 nor treaties such as the Convention against Torture, obligate states to allow civil suits against wrongdoers who have no “reasonable link” to the state.254 5.4

General Principles of Law and the Maastricht Principles

The Maastricht Principles,255 although adopted by nonstate experts, have been cited by both the CRC and the Committee on Economic Social and Cultural Rights.256 The latter Committee also cited the Commentary to the Maastricht Principles.257 The Maastricht Principles are presented as “restating human rights law on ETOs” [extraterritorial obligations] with respect to economic, social, and cultural rights.258 They appear to rely, not entirely on treaties or customary international law, but largely on general principles of law. Principle 6 asserts that “extraterritorial obligations are contained in the sources of international human rights law, including the Charter of the United Nations; the Universal Declaration of Human Rights; the International Covenant on Economic, Social and Cultural Rights; and oth­er universal and regional instruments.” Principle 6 cannot be simply a treaty claim. The Universal Declaration is not a treaty, and not all states are parties to the Covenant and other treaties. Nor, given the relative lack of state practice in the area of extraterritorial human rights obligations, can the Maastricht Principles as a whole purport to reflect customary international law. Apparently they rest instead on principles drawn from the various international instruments as well as from municipal law. Many Maastricht Principles do restate existing law. An example is the paraphrase of the Universal Declaration of Human Rights in Maastricht Principle 1: “All human beings everywhere are born free and equal in dignity and are entitled without discrimination to human rights and freedoms.” Other Principles begin with general principles of law, but then go well beyond. Principle 24 states in part: “All States must take necessary measures to ensure that non-State actors which they are in a position to regulate … such as … transnational corporations and other business enterprises, do not nullify or impair the enjoyment of economic, social and cultural rights.” Obliging states to regulate the conduct of their companies in other countries seems salutary. But it is hardly a restatement of existing law. The Commentary cites the “general and well-recognized principle” affirming “every State’s obligation not to allow knowingly its CETS No 197 art 22; CETS No 201 art 26. See subsection 3.2.1.3 and text at nn 117–22. 253 Nait-Liman v Switzerland (n 123) paras 183–87. 254 ibid paras 188–98; see also Nait-Liman v Switzerland, Chamber Judgment [2016] App No 51357/07, Judgment of 21 June 2016 and Concurring Opinion of Judge Lemmens. 255 Maastricht Principles (n 39). 256 GC 16 (n 3) (n 18) para 43; GC 24 (n 10) para 27 note 71. 257 GC 24 (n 10) paras 31 note 78, 36 note 86; see Olivier De Schutter et al, ‘Commentary to the Maastricht Principles’ (2012) 34 Human Rights Quarterly 1084. 258 Maastricht Principles (n 39) 4; see also GC 24, para 27 note 71. 251 252

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222  Research handbook on human rights and business territory to be used for acts contrary to the rights of other States.”259 It then cites one commentator who extends this duty to acts by private persons, and another who extends it to obligate states to exercise “due diligence in controlling parent companies that are effectively under its control.”260 Starting from a general principle, the Maastricht Principles invoke commentators to significantly extend it.261 Similarly, Principle 37 asserts in part: “Where the harm resulting from an alleged violation has occurred on the territory of a State other than a State in which the harmful conduct took place, any State concerned must provide remedies to the victim.” As the Commentary rightly notes: “The principle that every right must be accompanied by the availability of an effective remedy is a general principle of law.”262 True enough. But the added requirement that “any state concerned” must provide remedies expands the principle. Still, even if the Maastricht Principles are not all mere restatements of existing law, they tend to show that their extensions are consistent with generally accepted principles of law.

6. CONCLUSION International law today broadly permits, generally encourages, and sometimes obligates states to exercise regulatory and adjudicatory jurisdiction over transnational business activities emanating from or affecting their territories. For these purposes, the most important bases of jurisdiction in practice are territorial and active personality jurisdiction exercised by a state over the transnational activities of businesses domiciled or headquartered or with substantial business activities in that state. Within reasonable limits, a home state may regulate the global conduct of its own companies, including their transnational relations with subsidiaries and business partners. States now increasingly assert jurisdiction over transnational corporate conduct affecting human rights. If there is to be effective protection of human rights from the activities of multinational business enterprises in a globalized economy, there is no realistic alternative than to continue these trends toward greater embrace by states of their transnational jurisdiction and regulatory responsibilities.

Corfu Channel [1949] ICJ Reports [1949] 4, 22, cited in Maastricht Principle 24 Commentary para 2 and notes 128 and 129. 260 Maastricht Principle 24 (n 39), Commentary para 2 note 129 (2002). 261 See International Law Commission (‘ILC’), ‘Draft Articles on Prevention of Transboundary Harm from Hazardous Activities (2001), arts 1, 3 and 6; General Commentary, para 5; art 1, Commentary, para 16. 262 Maastricht Principle 37 (n 39) Commentary (1). 259

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11. Human rights responsibilities of state-owned enterprises Larry Catá Backer

1. INTRODUCTION The question of the state-owned enterprise (SOE) is as old as the construction of modernity, dating at least from the time of the great European colonization that started in earnest in the fifteenth century. The distinction between the economic activity and its regulation was only loosely conceded, as was the relation of law to government.1 The state, the Church, and the enterprise were bodies corporate,2 whose jurisdiction and powers were different in form but sometimes not in kind from those other bodies corporate which existed in various states of autonomy and dependency from the enterprise of the state.3 From the state, to the Church, to the enterprise – these bodies corporate constituted a continuum which served individual, corporate and national interests, which during European early modernity were all directed toward the construction of the first era of European globalization, characterized by its outward migration and ideologies of colonialism as a basis for international relations.4 To speak of the state, then, or of the enterprise, was to speak of related aspects of what the Chinese Communist Party would call in a much later age the development of productive forces,5 toward the end of some sort or another of social good. This strategic embedding was a constant through the twentieth century, even as the development of the state as the apex organization of political authority produced a utilitarian typology that separated public from private, and compartmentalized the economic, social, religious and economic spheres. The integrity of the seams of that typology was always threatened by the pressures of a constant tension – the operation of the state in economic life, the governmentalization of the enterprise, the religious foundations or intermeshing between law and religion, and the like. Managing that tension produced the great complex that is the law of sovereign immunity, and that for our purposes in this chapter is one that grounded in efforts to separate the public functions of the state from its commercial endeavours.6 At the same time, that tension produced a delegation of

Larry Catá Backer, ‘Reifying Law – Government, Law and the Rule of Law in Governance Systems’ (2008) 26(3) Penn State Intl L Rev 521. 2 Allison D Garrett, ‘The Corporation as Sovereign’ (2008) 60 Me L Rev 129. 3 Neil MacCormick, ‘Beyond the Sovereign State’ (1993) 56 Modern L Rev 1, 16. 4 Antony Anghie, Imperialism, Sovereignty, and the Making of International Law (CUP 2004). 5 Deng Xiaoping, ‘To Build Socialism We Must First Develop Productive Forces’ (The Selected Works of Deng Xiaoping: Modern Day Contributions to Marxism-Leninism April–May 1980) 5). We draw on nine such studies that measure NJGMs using some classification of remedy outcomes. The nine studies focus primarily on NCPs and IAMs, but some of them also touch upon grievance mechanisms associated with national human rights institutions and multi-stakeholder initiatives. The studies categorize and measure remedy outcomes resulting from NJGMs in somewhat different ways and focusing on different elements or pieces of effective remedy. Nearly all of them measure whether the case resulted in an agreement between parties and whether a public report of compliance, wrongdoing or determination of breach was made. Beyond the objective identification of the outcomes (for example, agreement vs no agreement, compliance report vs no report), an even smaller subset – five of the nine studies – investigate the quality of the outcome and whether it satisfied and/or changed anything in the situation of the complainants. Some of the studies also evaluate whether the outcome of the process could prevent a future harm. Together, these nine studies analyse the outcomes of more than 1,000 different cases of complainants seeking to access some form of remedy for business-related adverse human rights and/or environmental impacts through various state-based and non-state based NJGMs over the past two decades. Although they do not by any means cover all of the types of NJGMs outlined and categorized above, these nine studies nevertheless provide an insightful picture of the effectiveness of NGJMs in providing access to remedy. Table 22.3 provides an overview of the studies. The limited data available on remedy outcomes through NJGMs reveals that, while there are some success stories and a few examples of victims of business-related human rights or environmental abuse receiving remedy, the overall track record of NJGMs in delivering remedy outcomes is very weak. With regard to NCPs, the OECD’s 2016 study reviewed the outcomes of 169 cases filed by NGOs, unions and communities between 2011 and June 2016. The OECD focused only on whether an agreement was reached (not on the quality or impact of the agreement), and found that only 15 per cent of the 169 cases examined resulted in an agreement.65 The three studies that analysed remedy outcomes produced by an individual NCP (the Canadian, UK and Australian NCP) largely corroborate these findings. In Canada, AboveGround et al.66 found that only one out of five cases examined (20 per cent) produced an agreement and a benefit for the complainants. Similarly, Amnesty International found that, at the UK NCP, only five (20 per cent) of the 25 cases handled between 2011 and 2015 resulted in an agreement (two cases) or a determination of breach (three cases).67 Zornada found that the Australian NCP had the

65 Organisation for Economic Co-operation and Development, ‘Implementing the OECD Guidelines for Multinational Enterprises: The National Contact Points from 2000 to 2015’ (OECD 2016) 42. 66 AboveGround, MiningWatch Canada, OECD Watch (n 52). 67 Amnesty International UK, ‘Obstacle Course: How the UK’s National Contact Point Handles Human Rights Complaints under the OECD Guidelines for Multinational Enterprises’ (Amnesty International UK 2016) 45 and 49.

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Remedy is the reason   487 Table 22.3 Author

Recent empirical studies structurally measuring NJGM outcomes Year

NJGM

n=

NJGM remedy outcome measured

% of cases delivering remedy outcome

Wilde-Ramsing 2015

NCPs

250

et al.

Acknowledgement of wrongdoing, improvement

14%

in corporate policy and/or due diligence procedure, directly improved conditions for victims of corporate abuses, compensation for harms

Daniel et al.

2016

IAMs

7586

Agreement, compliance report, rights-holder

19%

satisfaction, rights compatibility OECD

NCPs

169

Agreement

15%

Miller-Dawkins 2016

2016

Range of

10

Mediated agreement providing individual remedy,

0%

et al.

state-based and

rights-holder satisfaction, normative effect, systemic

non-state-based

change, negative effect

NJGMs Above Ground

2016

Canadian NCP 5

Agreement, ‘demonstrable benefit for complainants’

20%

2016

UK NCP

25

Agreement, determination of breach

20%

2017

CAO

72

Agreement, compliance report

32%

2017

Australian NCP 15

Agreement, determination of breach

6%

NCPs

Acknowledgement of wrongdoing, improvement

27%

et al. Amnesty International Altholz and Sullivan Zornada

Wilde-Ramsing 2018 and Ingrams

18

in corporate policy and/or due diligence procedure, directly improved conditions for victims of corporate abuses, compensation for harms

weakest performance, producing just one remedy-related outcome (an agreement) in all of the 15 cases it handled between 2005 and 2016.68 The largest study focusing on NCPs, Wilde-Ramsing et al’s 2015 analysis of 250 cases filed by NGOs or communities between 2001 and 2015, took a more detailed and nuanced look at the remedy outcomes produced by NCPs.69 The researchers measured outcomes such as acknowledgement of wrongdoing, improvement in corporate policy and/or due diligence procedure, directly improved conditions for victims of corporate abuses and compensation for harms. The study found that only 14 per cent of all cases resulted in one of these types of remedy-related outcomes, which is in line with the findings in the other studies. Among the few NCP cases Wilde-Ramsing et al. identified as having produced a remedy outcome were a case that prevented a destructive oil drilling project from going forward in a World Heritage

Kristen Zornada, ‘The Australian OECD National Contact Point: How It Can Be Reformed’ (Corporate Accountability Research 2016). 69 Joseph Wilde-Ramsing et al, ‘Remedy Remains Rare: An Analysis of 15 Years of NCP Cases and Their Contribution to Improve Access to Remedy for Victims of Corporate Misconduct’ (OECD Watch 2015). 68

Mariëtte van Huijstee and Joseph Wilde-Ramsing - 9781786436405

488  Research handbook on human rights and business Site in the Democratic Republic of Congo,70 and a case resulting in concrete improvements in the working conditions of Argentine corn seed workers.71 In 2018, Wilde-Ramsing and Ingrams updated Wilde-Ramsing et al.’s 2015 NCP analysis, examining the remedy-related outcome of NCP cases completed in 2017.72 Of the 18 NGO/ community cases concluded in 2017, only one (5 per cent) – a bright spot in the case Former employees v Heineken – resulted in a compensatory remedy and a concrete improvement in the situation of the complainants. In total, only five (27 per cent) of the 18 cases resulted in some element of remedy for complainants, such as an acknowledgement of wrongdoing in the form of a determination of a company’s breach of the Guidelines, or an agreement to improve company policies. Turning to the independent accountability mechanisms (IAMs) associated with development finance institutions (DFIs), a comprehensive 2016 study by Daniel et al.73 reviewed the remedy outcomes of 758 complaints filed with 11 different IAMs over 21 years. The researchers found that only 19 per cent of all concluded complaints had produced a remedy-related outcome – 8 per cent resulted in agreements between the parties and 11 per cent in publicly-disclosed compliance reports. A study by Altholz and Sullivan focused on the CAO alone and found that, of the 72 cases filed with the CAO between 2000 and 2011, only 23 (32 per cent) produced an outcome in the form of an agreement.74 Beyond these quantitative results focused on objective outcomes, the study by Daniel et al also conducted an in-depth examination of six of the cases with an outcome (five compliance reports and one agreement) to determine more about the quality of the remedy outcome provided. The study focused on complainants’ satisfaction and rights-compatibility of the outcome, as well as the implication of the results for prevention of future harms. In three of the five compliance report cases, the researchers found that the complainants expressed some satisfaction with the immediate outcome (that is, the compliance report) because it provided recognition of their grievances and acknowledgement of wrongdoing. However, in none of the five compliance report cases did the complainants express satisfaction with the IFI’s response to the report or the ultimate outcome of the case. None of the cases led to changes on the ground or any reparation of harm. The outcome of the case in which an agreement was reached was found to be below the complainants’ expectations because the agreement was limited in scope and the compensation provided was inadequate. The researchers concluded that none of the six cases had produced an outcome that was rights compatible.75 Indeed, the UN Working Group on Business and Human Rights has noted that ‘some remedy

OECD Watch case database, WWF vs SOCO accessed 17 October 2017. 71 OECD Watch case database, CEDHA et al vs Nidera accessed 17 October 2017. 72 Joseph Wilde-Ramsing and Marian Ingrams, ‘The State of Remedy under the OECD Guidelines: Understanding NCP Cases Completed in 2017 through the Lens of Remedy’ (OECD Watch 2018). 73 Caitlin Daniel et al (n 50). 74 Roxanna Altholz and Chris Sullivan, ‘Accountability & International Financial Institutions: Community Perspectives on the World Bank’s Office of the Compliance Advisor Ombudsman’ (University of California, Berkeley 2017) 19. 75 Caitlin Daniel et al (n 50). 70

Mariëtte van Huijstee and Joseph Wilde-Ramsing - 9781786436405

Remedy is the reason   489 mechanisms may deliver outcomes that are not rights-compatible, for example in providing types of remedy that are not appropriate to the severity of the harm suffered’.76 In terms of prevention of future harms, the Daniel et al. study also casts doubt on the effectiveness of the outcomes produced by the IAMs. In three of the six cases, the IFI indicated that the complaint had led to improvements in policy or heightened attention to the issues raised, but the researchers could find no proof of this. Miller-Dawkins et al.’s 2016 research examined remedy outcomes across a wider range of NJGMs than the above single-mechanism studies, including NJGMs associated with the NHRIs and sectoral MSIs such as the Ethical Trading Initiative.77 The study’s conclusion corroborates the above – across the ten cases examined by the researchers, the NJGMs ‘fell short of delivering an individual remedy both procedurally and substantively’ in every single case. Not a single one of the ten cases resulted in an outcome aligned with the remedy desired by the complainants or meeting the standard of ‘relief needed to repair the harm’.78 Despite this overall conclusion, researchers did find some bright spots in the form of ‘some form of positive result from the perspective of claimants seeking remedy’ in five of the ten (50 per cent) cases. Examples of such – often indirect – positive results include a ‘normative boost’ in an NCP case filed by the Dongria Kondh tribe in India against Vedanta Bauxite Mine. Though the researchers determined the UK NCP’s impact on the situation to be ‘marginal’, they did identify some normative impact on local stakeholders resulting from the NCP’s statement.79 Another example of a ‘positive result’ identified by the researchers was an NHRI case that led to some monetary compensation for Indian quarry mine widows, though the remedy the complainants actually sought – improvements in the pay and working conditions in the mine – did not result from the case.80 Other indirect positive effects of NJGMs identified include increasing organization in communities or worker’s groups, drawing public attention to a problem, shifting dynamics between companies and communities. Indeed, the UN Working Group on Business and Human Rights has observed that ‘non-judicial mechanisms can be successful in transforming corporate-community relationships’.81 Interestingly, however, the Miller-Dawkins et al. research – which was the only one of the studies reviewed here that structurally examined negative remedy outcomes of NJGM cases on the complainants – found that some NJGM cases had an adverse effect on corporate– community relationships by ‘reinforcing existing power dynamics and further disenfranchising workers or communities and entrenching existing business positions and practices (e.g. allowing a project to go ahead or withdrawal of orders rather than helping a supplier fix a problem)’.82 Miller-Dawkins et al. also observed a negative opportunity cost outcome of some NJGM cases, that is, that they ‘take significant resources and time away from other organizing strategies’.83 76 UN Working Group on Business and Human Rights, ‘Report of the Working Group’ (OHCHR 2014) 10 accessed 3 March 2020. 77 Miller-Dawkins (n 54). 78 ibid 31. 79 ibid 27. 80 ibid 27. 81 UN Working Group on Business and Human Rights, ‘Report’ (4 May 2014) accessed 3 March 2020. 82 Miller-Dawkins (n 54) 31. 83 ibid 28.

Mariëtte van Huijstee and Joseph Wilde-Ramsing - 9781786436405

490  Research handbook on human rights and business While largely arriving at a single, consistent conclusion – that the remedy outcomes produced by NJGMs are very limited in number and scope – the nine studies draw differing lessons and provide varying recommendations for increasing the effectiveness of NJGMs in achieving remedy outcomes. In this regard, there is one lesson that stands out as being present in nearly all nine studies. It has to do with what one of the studies calls ‘leverage’,84 one calls ‘authority’,85 others call ‘consequences’86 and still others call ‘teeth’ of NJGMs. One of the reasons for the low degree of effectiveness in delivering remedy outcomes is that NJGMs remain too dependent on the party that caused the harm to voluntarily agree to provide a remedy. NJGMs currently lack sufficient authority/leverage/teeth to ensure that parties that have caused harm participate in the NJGM process, and the authority/leverage/teeth to ensure that any recommendation that they make or agreement that is reached is actually implemented and results in a remedy.

6. CONCLUSION Despite increasing recognition of the need to measure and monitor remedy outcomes achieved through NJGMs,87 the literature contains very few studies that actually do so.88 Most of the available studies focus on measuring NJGMs on process-related effectiveness criteria,89 under the assumption that due process should lead to fair and effective remedy outcomes. However, recent research finds that this assumption does not necessarily hold.90 Within the limited body of research into the effectiveness of NJGMs in remedy provision, some studies have attempted to identify the outcomes (for example, has the process produced results?). An even more limited number of studies have actually evaluated these outcomes in terms of their quality (for example, were the victims satisfied with the outcome?). Where they did, the picture is mixed: we do see cases where NJGMs have been able to provide remedy for victims, but these are few and far between. Remedy remains rare and the ‘system’ as such does not really exist; it resembles a chaotic, hard to navigate patchwork. The conclusion of this state of the art overview may therefore be unsurprising: we need more research into the remedy outcomes of NJGMs, in order to learn from the best practices and to be able to strengthen

ibid. Roxanna Altholz and Chris Sullivan, ‘Accountability & International Financial Institutions: Community Perspectives on the World Bank’s Office of the Compliance Advisor Ombudsman’ (University of California, Berkeley 2017) 19. 86 Joseph Wilde-Ramsing, ‘Remedy Remains Rare: An analysis of 15 Years of NCP Cases and Their Contribution to Improve Access to Remedy for Victims of Corporate Misconduct’ (OECD Watch 2015). 87 Scheltema (n 44); Brian Ganson, ‘Access to Remedy through Consensual Processes’ (no year) ACCESS facility, Working paper, 7 accessed 26 September 2017. 88 Miller-Dawkins (n 54) 14. 89 See, for example, Sander van ’t Foort and Joseph Wilde-Ramsing, ‘A Comparative Analysis of the Dutch Specific Instance Procedure’ (2015) NVTMCM accessed 20 September 2017; OECD, ‘Implementing the OECD Guidelines for Multinational Enterprises: The National Contact Points from 2000 to 2015’ (OECD 2016); CSR Europe, ‘Assessing the Effectiveness of Company Grievance Mechanisms’ (CSR Europe 2013). 90 Miller-Dawkins (n 54) 31. 84 85

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Remedy is the reason   491 this part of the remedy system. One lesson already emerges quite clearly: many NJGMs lack enforcement power, which strongly constrains their effectiveness to provide remedy. In order for NJGMs to live up to their promise to supplement and complement judicial mechanisms and to ensure effective access to remedy, they must be given the tools and the teeth necessary to do so. The Access to Remedy pillar of the UNGPs envisions a bouquet of remedies – provided by a mix of judicial and non-judicial mechanisms – so that those harmed by business-related human rights abuses could choose the one that best fit their needs, resources and objectives. However, that is not the world we live in. More research into outcomes produced by and ultimate impacts of NJGMs can make an important contribution, with evidence-based recommendations to improve the remedy system.

Mariëtte van Huijstee and Joseph Wilde-Ramsing - 9781786436405

23. National human rights institutions and their (extended) role in the business and human rights field Humberto Cantú Rivera

1. INTRODUCTION The complexity of the relationship between States, businesses and human rights and the evolution of this field in the past decade has given rise to important challenges, most notably in relation to capacity-building efforts and effective access to judicial and non-judicial remedies. In this regard, some non-State entities such as national human rights institutions (hereinafter ‘NHRIs’) have an important role to play in order to contribute effectively to the dissemination of international standards, and to complement State efforts in the implementation of their international obligations. NHRIs are public bodies whose main mission is the promotion and – in some cases – protection of human rights within a domestic jurisdiction.1 Independent from governments, they have been recognized by the international community as an important component in mainstreaming human rights into public policies and agendas, a situation that was noted by a resolution of the UN General Assembly in 1993 which included in its annex the Principles relating to the status of national institutions, also known as the ‘Paris Principles’.2 As the recognized basis for the functioning of NHRIs, the Paris Principles stipulate that national institutions shall provide advice to the government, parliament or other competent bodies in relation to any issue concerning human rights, including legislative or administrative provisions that may affect human rights; promote and ensure the harmonization of legislation and regulations with international human rights standards; encourage the ratification of such international instruments; contribute and cooperate with the UN and other international organizations in relation to human rights issues; and contribute to the preparation and dissemination of human rights education, especially to prevent discrimination.3 While the main mandate of NHRIs is to contribute to the promotion and dissemination of human rights, the Paris Principles also recognize that in some instances, some of them may have quasi-jurisdictional competence to receive and consider complaints concerning individual situations. Despite the fact that such complaints handling capacity is not equivalent to a judicial procedure, its goal is to facilitate amicable settlements, to promote access to remedies by the alleged victim and

1 For an overview on NHRIs, see Rachel Murray, ‘The Role of National Human Rights Institutions’ in Mashood A Baderin and Manisuli Ssenyonjo (eds), International Human Rights Law: Six Decades after the UDHR and Beyond (Ashgate 2010) 305. 2 General Assembly, ‘National Institutions for the Promotion and Protection of Human Rights’ (A/ RES/48/134, 20 December 1993) Annex. 3 ibid, para 3.

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National human rights institutions and the business and human rights field  493 especially to make recommendations to relevant authorities to ensure non-repetition of the actions or factors that gave rise to the human rights violation. The work of NHRIs has been traditionally focused on State actions or omissions, following the paradigm set forth by international human rights law. However, globalization and the important economic influence and power wielded by business enterprises operating transnationally has led NHRIs to progressively focus their attention on the impacts of business activities on human rights.4 In this regard, just as they do with respect to States and governmental authorities, national institutions can contribute to the dissemination, promotion and protection of human rights in the economic sphere, notably through capacity-building at the domestic and regional levels, and by providing – where they are mandated to do so – mechanisms that allow access to effective remedies by victims of business-related human rights abuses. This chapter will first address the role envisaged for NHRIs by the globally accepted standard in this field, the UN Guiding Principles on Business and Human Rights (‘UNGPs’), as well as by previous reports by the former Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises (‘SRSG’) that touch upon the possible functions of NHRIs in business and human rights. It will then turn to analyse examples from developing countries in the Americas, Asia and Africa, in order to exemplify the different functions that NHRIs (whether mandated to address business-related cases or not) could perform in the fulfilment of their mandates. Finally, it will address the possible role that NHRIs could have in the prospect of a future business and human rights treaty, which would probably benefit from a larger and more active role taken by these entities.

2.

THE UN GUIDING PRINCIPLES ON BUSINESS AND HUMAN RIGHTS AND THE ROLE OF NHRIS

The adoption and endorsement of the UNGPs by the UN Human Rights Council on 16 June 2011 undeniably represents a landmark step in fostering corporate accountability for human rights abuses. The tripartite approach of the UNGPs helped to set a relatively clear tone as to the expectations of international society vis-à-vis conduct in which both the State and the private sector should engage. Indeed, States have a binding international obligation to protect human rights, deriving from international customary law,5 as well as from treaty law, particularly from the binding instruments of the International Bill of Human Rights. In addition, general comments or observations by UN Treaty Bodies have refined that interpretation, establishing the State obligation to protect within their jurisdiction or territory,6 and in some cases even extraterritorially.7 In relation to businesses, there is a general social expectation that they 4 On this, see also Linda C Reif, ‘The UN Guiding Principles on Business and Human Rights and Networked Governance: Improving the Role of Human Rights Ombudsman Institutions as National Remedies’ (2017) 17(4) Human Rights Law Review 603. 5 Emmanuel Decaux, ‘Le projet de l’ONU sur la responsabilité des entreprises transnationales’ in Isabelle Daugareilh (ed), Responsabilité sociale de l’entreprise transnationale et globalization de l’économie (Bruylant 2010) 473. 6 Human Rights Committee, ‘General Comment No. 31: The Nature of the General Legal Obligation Imposed on States Parties to the Covenant’ (CCPR/C/21/Rev.1/Add.13, 29 March 2004) para 10. 7 The most explicit commentary in relation to extraterritorial obligations was recently adopted: Committee on Economic, Social and Cultural Rights, ‘General Comment No. 24 on State Obligations

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494  Research handbook on human rights and business respect human rights in their activities and operations, and where possible in their business relationships or supply chains.8 And in both cases, the UNGPs clearly recognize the need to ensure effective access to remedy, whether judicial, non-judicial or non-State based, in order to allow victims to obtain reparation for human rights violations.9 However, during his mandate, the SRSG progressively identified in different reports how other actors, such as NHRIs, can also contribute to fostering corporate respect of human rights. For example, the SRSG asserted the important role that NHRIs have to play ‘in relation to monitoring third party compliance in general’,10 including in relation to businesses. In addition, he identified the potential of NHRIs’ complaints handling mechanisms as another possible avenue to ensure access to remedy, stating ‘they can provide a means to hold business accountable’.11 As the mandate moved forward, the specific nuances of the role of NHRIs in the business and human rights agenda became clearer. For instance, the SRSG identified how ‘choice, tradition or capacity’ limited the possibility of NHRIs to consider business-related

under the International Covenant on Economic, Social and Cultural Rights in the Context of Business Activities’ (E/C.12/GC/24, 23 June 2017); see also Committee on Economic, Social and Cultural Rights, ‘General Comment No. 14 (2000): The Right to the Highest Attainable Standard of Health (article 12 of the International Covenant on Economic, Social and Cultural Rights’ (E/C.12/2000/4, 11 May 2000) para 39; Committee on Economic, Social and Cultural Rights, ‘General Comment No. 15 (2002): The Right to Water (arts. 11 and 12 of the International Covenant on Economic, Social and Cultural Rights’ (E/C.12/2002/11, 26 November 2002) para 31. 8 See Humberto Cantú Rivera, ‘Los desafíos de la globalización: reflexiones sobre la responsabilidad empresarial en materia de derechos humanos’ in Humberto Cantú Rivera (ed), Derechos humanos y empresas: reflexiones desde América Latina (IIDH 2017); Justine Nolan, ‘The Corporate Responsibility to Respect Human Rights: Soft Law or Not Law?’ in Surya Deva and David Bilchitz (eds), Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect (CUP 2013) 144. Cf Surya Deva, ‘Treating Human Rights Lightly: A Critique of the Consensus Rhetoric and the Language Employed by the Guiding Principles’ in Surya Deva and David Bilchitz (eds), Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect (CUP 2013) 94; David Bilchitz, ‘A Chasm between “Is” and “Ought”? A Critique of the Normative Foundations of the SRSG’s Framework and the Guiding Principles’ in Surya Deva and David Bilchitz (eds), Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect (CUP 2013) 118–23. 9 A project on access to remedies for business-related human rights abuses has been undertaken by the Office of the High Commissioner for Human Rights at the request of the Human Rights Council. The first report and its addendum, focusing on judicial access to remedies, was presented to the Council in 2016, and a second set of reports devoted to nonjudicial remedies was presented in June 2018. For the report on access to judicial remedies, see Human Rights Council, Improving Accountability and Access to Remedy for Victims of Business-Related Human Rights Abuse. Report of the United Nations High Commissioner for Human Rights (A/HRC/32/19, 10 May 2016); on non-judicial remedies, see Improving accountability and access to remedy for victims of business-related human rights abuse through State-based non-judicial mechanisms. Report of the United Nations High Commissioner for Human Rights (A/HRC/38/20, 14 May 2018). 10 Human Rights Council, State Responsibilities to Regulate and Adjudicate Corporate Activities under the United Nations Core Human Rights Treaties: An Overview of Treaty Body Commentaries. Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises (A/HRC/4/35/Add.1, 13 February 2007) para 41. 11 Human Rights Council, Protect, Respect and Remedy: A Framework for Business and Human Rights. Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises (A/HRC/8/5, 7 April 2008) para 97.

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National human rights institutions and the business and human rights field  495 human rights abuses;12 yet he also underscored in a subsequent report how NHRIs complaints handling mechanisms are ‘important examples of how non-judicial remedy can contribute to the State duty to protect’.13 The role envisaged by the SRSG in relation to NHRIs made its way – although indirectly – to the UNGPs,14 and has also been considered and interpreted by the special procedure created for their promotion and dissemination, the UN Working Group on business and human rights (WG). The primary functions established in the Guiding Principles in relation to States and businesses are complemented by a secondary role envisaged for other actors, including NHRIs, whose role and functions have been largely defined by the already mentioned Paris Principles.15 While the latter do not make explicit reference to issues involving human rights abuses by business enterprises, they may be understood as being broad enough to allow national institutions to consider such issues if they so determine.16 Thus, by making explicit references in the commentary to the UNGPs as to the different roles that NHRIs may play in the business and human rights context, the SRSG made sure to describe a range of possible functions that could relate to NHRIs’ general work in the human rights field. The UNGPs, through their commentary, identify three different roles for NHRIs: a monitoring role in relation to the State, notably regarding the conformity of the domestic legal framework to international human rights standards, as well as in its degree of enforcement; an advisory role in relation to business enterprises; and finally, as a potential avenue for non-judicial remedy. 2.1

The ‘Monitoring’ Role of NHRIs

In relation to its potential monitoring role, the commentary to principle 3 sets forth that ‘National human rights institutions that comply with the Paris Principles have an important role to play in helping States identify whether relevant laws are aligned with their human

12 Human Rights Council, Business and Human Rights: Towards Operationalizing the ‘Protect, Respect and Remedy’ Framework. Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises (A/HRC/11/13, 22 April 2009) para 103. 13 Human Rights Council, Business and Human Rights: Further Steps toward the Operationalization of the ‘Protect, Respect and Remedy’ Framework. Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises (A/HRC/14/27, 9 April 2010) para 101. 14 Meg Brodie, ‘Pushing the Boundaries: The Role of National Human Rights Institutions in Operationalising the “Protect, Respect and Remedy” Framework’ in Radu Mares (ed), The UN Guiding Principles on Business and Human Rights: Foundations and Implementation (Martinus Nijhoff 2012) 256–58. 15 General Assembly, ‘National Institutions for the Promotion and Protection of Human Rights’ (A/ RES/48/134, 20 December 1993) Annex. 16 Brodie (n 14) 253; see also Surya Deva, ‘Corporate Human Rights Abuses: What Role for the National Human Rights Institutions’ in Hitoshi Nasu and Ben Saul (eds), Human Rights in the Asia-Pacific Region: Towards Institution Building (Routledge 2011) 241. It is in this context where it may be possible to draw a parallel from the much discussed issue of extraterritoriality in the UNGPs commentary: NHRIs are not generally prohibited from doing so, provided they can identify a basis to examine a complaint related to corporate human rights abuses, including by omissions from the State.

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496  Research handbook on human rights and business rights obligations and are being effectively enforced’,17 a position which largely reflects the provisions of the Paris Principles, which stipulate that: the national institution shall examine the legislation and administrative provisions in force, as well as bills and proposals, and shall make such recommendations as it deems appropriate in order to ensure that these provisions conform to the fundamental principles of human rights; [and shall] promote and ensure the harmonization of national legislation regulations and practices with the international human rights instruments to which the State is a party, and their effective implementation.18

In this regard, NHRIs have the competence and legal capacity to monitor State activities and to make specific pronouncements regarding the acts or omissions of both the executive and legislative branches, to ensure the conformity of the legal framework and public policies with international human rights standards. As a result, the position of NHRIs fits ideally in the context of the UNGPs, and more importantly of national action plans on business and human rights,19 which are expected to identify currently existing standards and to explore avenues to improve the domestic legal and policy framework to curtail corporate human rights abuses. The same competence exists over State-owned enterprises, in relation to which the UNWG recommended that NHRIs ‘should assess whether relevant policies relating to State-owned enterprises are aligned with the State’s human rights obligations and provide guidance to the State in this regard’,20 as well as provide guidance to State-owned enterprises themselves.21 As can be seen particularly in the context of State-owned enterprises, NHRIs are called to fulfil two of the three roles identified in the UNGPs, by monitoring State policies and regulations with regard to their behaviour and practices, and by advising SOEs themselves as to their enhanced responsibility to respect human rights. 2.2

The ‘Advisory’ Role of NHRIs

An advisory role for NHRIs is also portrayed in the UNGPs in two specific sections: in the commentary to principle 3, where it is set forth that NHRIs ‘have an important role to play … in providing guidance on human rights also to business enterprises and other non-State

17 Human Rights Council, Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework. Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises (A/HRC/17/31, 21 March 2011) Commentary to Principle 3. 18 General Assembly, ‘National institutions for the promotion and protection of human rights’ (A/ RES/48/134, 20 December 1993) Annex, parsa 3.a.i, 3.b; an interesting element can also be found in the preamble of the resolution containing the Paris Principles, where the General Assembly noted ‘the important and constructive role played by national institutions for the promotion and protection of human rights, in particular in their advisory capacity to the competent authorities’. 19 National Action Plans on Business and Human Rights (NAPs) are public policy tools that were first promoted by EU institutions, in an effort to ensure Member States would work towards the implementation of the UNGPs. They were endorsed by the UN Working Group on Business and Human Rights, and have become one of the main benchmarks to measure State progress in implementing the UNGPs. For a critical analysis of NAPs, see Humberto Cantú Rivera, ‘National Action Plans on Business and Human Rights: Progress or Mirage?’ (2019) 4 Business and Human Rights Journal 213–37. 20 Human Rights Council, Report of the Working Group on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises (A/HRC/32/45, 4 May 2016) para 103. 21 ibid, para 104.

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National human rights institutions and the business and human rights field  497 actors’,22 and in the commentary to principle 23, where, under the second pillar on the corporate responsibility to respect human rights, the SRSG recommends that businesses seek external advice from NHRIs and other actors,23 particularly for issues of context where corporations may find it difficult to comply with their responsibility to respect human rights due to conflicting international and domestic standards or requirements. In this regard, NHRIs have an important role to perform in order to ensure that businesses fully understand the implications of what is necessary to comply with their responsibility to respect human rights, and to contribute to developing a corporate human rights culture at the domestic level. While the Paris Principles do not explicitly refer to an advisory role for actors other than the State, an interpretation lato sensu to this end could be inferred from its mandate to ‘[f]reely consider any questions falling within its competence, whether they are submitted by the Government or taken up by it without referral to a higher authority, on the proposal of its members or of any petitioner’24 (emphasis added). In this sense, the UNGPs would seem to align with the Paris Principles, by encouraging NHRIs to provide guidance motu proprio or by request from business enterprises. 2.3

The Role of NHRIs in Access to (Non-judicial) Remedy

Finally, the SRSG identified in Principles 25 and 27 a role for NHRIs in relation to access to remedy, particularly non-judicial remedy. Especially in principle 27, the SRSG explicitly pointed out that: [g]aps in the provision of remedy for business-related human rights abuses could be filled, where appropriate, by expanding the mandates of existing non-judicial mechanisms and/or by adding new mechanisms. These may be mediation-based, adjudicative or follow other culturally appropriate and rights-compatible processes – or involve some combination of these – depending on the issues concerned, any public interest involved, and the potential needs of the parties … National human rights institutions have a particularly important role to play in this regard.25

In relation to this aspect of the functioning of NHRIs, the Paris Principles are silent as to the cases that can be reviewed through their complaints-handling function,26 particularly regarding

Human Rights Council, Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework. Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises (A/HRC/17/31, 21 March 2011) Commentary to Principle 3. 23 ibid, Commentary to Principle 23; see also John Gerard Ruggie, Just Business: Multinational Corporations and Human Rights (WW Norton 2013) 103. 24 General Assembly, ‘National Institutions for the Promotion and Protection of Human Rights’ (A/ RES/48/134, 20 December 1993) Annex. 25 Human Rights Council, Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework. Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises (A/HRC/17/31, 21 March 2011) Commentary to Principle 27. 26 In accordance with the Paris Principles, NHRIs may have a complaints-handling capacity, which allows them to review cases brought by alleged victims of human rights violations. While not all NHRIs equipped with this function perform in the same way, they may issue nonbinding recommendations to authorities, in an effort to publicly promote respect of human rights. In many cases, those recommendations cannot be legally enforced, therefore underlining the moral authority or value of such decisions. 22

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498  Research handbook on human rights and business the type of perpetrators of human rights abuses. This, of course, can be interpreted as not limiting the type of human rights abuses that can be processed by NHRIs; however, as the SRSG pointed out, some of them may not be well equipped – technically or financially – to address human rights abuses involving corporate actors, especially those operating transnationally.27 As Surya Deva mentions, this is most likely the result of the excessive State-centred focus of international human rights law.28 Access to remedy at early stages, particularly through State-based non-judicial procedures, can contribute to de-escalating some types of human rights abuses and preventing their judicialization; this could also be the case for NHRIs. And yet, the identification of the aspects that need to be considered to ensure access to effective remedies has not necessarily translated into practical changes on the ground. For example, the UNGPs ignore – or at least are silent about – the fact that many of the Paris Principles’ compliant institutions ‘do not have the competence to receive or investigate complaints’,29 a situation that may render the potential envisaged by the UNGPs overly optimistic. In addition, public perception of the effectiveness of recommendations typically issued by NHRIs depends on the binding (or non-binding) nature of the resolution, an aspect that may reduce the NHRIs’ perceived social – and even legal – value as effective tools for access to remedy.30 While the commentary to the UNGPs acknowledges that expanding the mandates of NHRIs may be necessary in order for them to handle complaints about corporate-related human rights abuses, a lack of political will or fear of turning NHRIs into quasi-judicial institutions may prevent parliaments and executive branches from pursuing this goal, an aspect that should not be underestimated. However, despite the potential lack of competence of NHRIs regarding business-related human rights abuses, a plausible option may still be found in both the UNGPs and the Paris Principles. As has been recognized, the Paris Principles do not contain a specific mandate over such cases;31 on the contrary, ‘in practice most of the NHRIs have been established to primarily redress state human rights abuses’.32 However, this does not necessarily entail that businesses cannot be held accountable at all for their participation in human rights violations, at least in relation to the complaints handling capacity of NHRIs. Following the structure of the UNGPs, the State is the main duty bearer under international human rights law, and thus has an explicit obligation to protect human rights, including from non-State actors such as business enterprises. In this respect, a State’s omission to prevent, investigate, sanction and redress human rights abuses committed by non-State actors would compromise its international responsibility.33 This same logic would be equally applicable in the complaints handling function of NHRIs: if a human rights violation results from a failure by government to properly regulate the activities of business enterprises operating within their jurisdiction, its responsibility would be compromised as a result of a lack of compliance with its obligations

Brodie (n 14) 247. Deva (n 16) 241. 29 Brodie (n 14) 259; see also Deva (n 16) 241. 30 Brodie (n 14) 265. 31 Deva (n 16) 236. 32 ibid. 33 Case of Velásquez Rodríguez v Honduras, Judgment, Merits [29 July 1988] I/A Court H.R., Series C No 4, para 172. 27 28

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National human rights institutions and the business and human rights field  499 under the first pillar of the UNGPs – and, consequently, of international and regional human rights treaties to which they are a party.34 This aspect, of course, does not address directly the responsibility of businesses: the additional principles relating to the quasi-jurisdictional competence of NHRIs clearly stipulate that they may make ‘recommendations to the competent authorities’,35 not to non-State actors contributing to, or directly responsible for, the human rights violation. However, NHRIs may make explicit references to the situation leading to human rights abuses and its perpetrators, including in relation to the failure to uphold the corporate responsibility to respect human rights, and make explicit recommendations to the State to promptly investigate (and eventually sanction) those responsible for the direct commission of human rights abuses. Thus, NHRIs can contribute to ensure access to non-judicial remedy for corporate human rights abuses directly, by addressing abuses of human rights by corporations in their recommendations and resolutions, and indirectly, through the adoption of a recommendation (or order, if they have the legal power to do so) to ensure that the State takes measures to regulate, investigate or sanction corporate conduct that infringes human rights,36 including through prosecution or other judicial or non-judicial measures that may guarantee compensation,37 satisfaction, rehabilitation, restitution and guarantees of non-recurrence.38 This type of scenario could (or at least should) lead NHRIs to focus on one of the main issues in this area: capacity-building. In order to ensure the effective fulfilment of their duties under the UNGPs and their commentary, NHRIs need to build capacity not only within the State or the business sector, as envisaged in Pillars I and II, but also within their own structures and procedures. Without adequate technical capabilities and sufficient human and financial resources, NHRIs may face important obstacles to fulfilling their role in promoting and protecting human rights, including against non-State actors – especially those in federal States. This could in turn prevent them from having an impact on addressing cultural change in both the business sector and the government, a prerequisite to (more effectively) protect human 34 A parallel to this argument can be found in Ramiro Rivadeneira Silva, ‘La experiencia y retos para las instituciones nacionales de derechos humanos latinoamericanas en torno a la protección de los derechos humanos frente a actividades empresariales’ in Humberto Cantú Rivera (ed), Derechos humanos y empresas: reflexiones desde América Latina (IIDH 2017) 344–45. 35 General Assembly, ‘National institutions for the promotion and protection of human rights’ (A/ RES/48/134, 20 December 1993) Annex. 36 This, for example, occurred in Mexico, where the National Human Rights Commission clearly expressed that its indirect competence was based on an omission of the authority to properly regulate business enterprises, which would therefore allow it to demand that the corresponding authority investigate and sanction the public officials whose conduct allowed the human rights violation to happen. This entails, however, the need to assess the corporate conduct that resulted in the abuse, which could also lead to sanctions for inappropriate conduct that led to human rights abuses. Comisión Nacional de los Derechos Humanos, Recomendación No. 34/2018 sobre el caso de la construcción del libramiento de la autopista México-Cuernavaca, conocido como ‘Paso Exprés’, y posterior socavón ocurrido el 12 de julio de 2018, en Cuernavaca, Morelos, que derivó en violaciones a los derechos humanos de V1 a V7 (8 October 2018), paras 424–25. 37 Deva (n 16) 243: ‘Although they might not be able to resolve successfully formal complaints against corporations in all cases, they could perhaps facilitate mediation and conciliation between relevant parties.’ 38 General Assembly, ‘Basic Principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross Violations of International Human Rights Law and Serious Violations of International Humanitarian Law’ (A/RES/60/147, 16 December 2005).

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500  Research handbook on human rights and business rights and to prevent, to the greatest extent possible, future human rights violations. This aptly encapsulates the interrelated character of the three pillars of the UN Guiding Principles, including in relation to the role of NHRIs. As the next section will show through cross-regional examples, NHRIs can play an important role in promoting human rights in the private sphere and in addressing human rights violations through their complaints handling mechanisms (where they exist), regardless of the existence of a specific mandate to address business-related human rights violations.

3

NHRIS AND BUSINESS: CROSS-REGIONAL EXPERIENCES

National human rights institutions throughout the world have dealt in varying depth with the issue of business-related human rights abuses. While some of them have been especially proactive in engaging the business sector in order to raise awareness and build capacity, hence complying with the role suggested in Pillars I and II of the UNGPs, others have focused on their complaints handling function and how they could use it to foster effective access to non-judicial remedies. This section will touch upon three different examples of complaints brought before NHRIs in Latin America, Asia and Africa, in order to analyse some recent developments in this field, and posit future lines of action to enhance the role of NHRIs vis-à-vis corporate human rights abuses. 3.1

Awareness Raising and Complaints Handling on Business and Human Rights in Mexico’s Local and National Human Rights Institutions

The first example that will be addressed is the case of Mexico, which serves to show some of the difficulties faced by human rights institutions in federal States. Mexico has a complex national human rights ‘system’,39 with one National Human Rights Commission (CNDH) and 32 local counterparts in each of the states and Mexico City (local human rights commissions). The work of each is generally independent, with the CNDH usually overseeing authorities at the federal level, and each local human rights commission monitoring the work undertaken by local authorities. This complexity is exacerbated by the distribution of competences between the national and local commissions, particularly because some ‘strategic’ industrial sectors are regulated by federal authorities – which would then fall under the jurisdiction of the CNDH – and many other sectors fall under the jurisdiction of local authorities, which would thus be overseen by local human rights commissions. However, some aspects or activities within those strategic industrial sectors, such as environmental protection or land use, are regulated by local 39 Formally, there is no ‘human rights system’; jurisdiction over cases is split by statute, depending on the involvement of federal, local or municipal authorities in human rights abuses. Collaborations may be agreed upon between the National Human Rights Commission and its local counterparts, normally for capacity building or awareness raising. However, for issues related to jurisdiction over complaints brought before human rights commissions, legislation and regulation of the National Human Rights Commission defines the cases and scenarios in which the federal commission can ‘attract’ cases from its local counterparts. However, the 33 human rights commissions in Mexico can receive complaints for alleged human rights violations. For an explicit explanation of the singularities of this system, see Humberto Cantú Rivera, ‘Hacia un sistema nacional de derechos humanos’ (2017) 36 Cuestiones Constitucionales: Revista Mexicana de Derecho Constitucional 27.

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National human rights institutions and the business and human rights field  501 authorities, which then may confer jurisdiction upon the local human rights commission to oversee a specific case, regardless of the fact that in general terms, that industry is regulated at the federal level. As can be observed from this description, the jurisdictional limits are far from clear; nevertheless, despite the complexity of asserting jurisdiction between two independent human rights commissions, some of them have made relevant contributions and taken important steps to include the issue of business and human rights in their agenda.40 One interesting case in 2015 in the state of Nuevo Leon addressed the issue of labour and human rights standards in the supply chain of an Asian automaker (Kia Motors) that had recently arrived in Mexico.41 The Kia case involved alleged inhuman conditions to which migrant workers were subjected while constructing one of the facilities for the automotive company, including overcrowding in the warehouse that the company provided as accommodation, in violation of the right to adequate housing; limited access to water, sanitation and food; and working hours beyond the statutory limits. The Human Rights Commission of Nuevo Leon (CEDHNL) initiated a complaint ex officio, only to find out that the construction of the facility for the automaker had been assigned to a subcontractor (which, as was discovered eventually, was a company from a different state in Mexico with no registered employees), and that the Mexican subsidiary of the automaker was not directly involved in the process. Nevertheless, the automotive company agreed to two things: to exercise its leverage to ensure its subcontractors respected human and labour rights in their operations, and to hold meetings with officials and experts from the human rights commission to raise awareness at the management level of the company (including the legal department) regarding the UNGPs. These activities led to another series of seminars and capacity building sessions with local government officials (including those at the ministries of labour and economic development, in charge of supervising the enforcement of labour and health and safety standards in the workplace and of attracting foreign direct investment, respectively), who were completely unaware of the global business and human rights framework. The case was archived due to the commission’s inability to locate or identify the alleged victims; however, two interesting lessons can be drawn from this experience. First, human rights commissions can fulfil an important role in setting up multi-stakeholder mediation and conciliation processes, a function that is often neglected in cases of alleged corporate human rights violations. Depending on the severity of the abuse, some cases may be de-escalated with the early participation of human rights commissions or ombudsman offices, who may bring expertise and experience in addressing human rights violations – something that authorities or

This was recognized by the UN Working Group on business and human rights in its report on the visit to Mexico, where it highlights some of the actions taken by the local human rights commissions of Oaxaca, Jalisco, Sonora and Mexico City in this matter. Human Rights Council, Report of the Working Group on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises on Its Mission to Mexico, A/HRC/35/32/Add.2, (27 April 2017) paras 94–96. A glaring omission in the report is the cases brought before the Human Rights Commission of Nuevo Leon, an industrial state in northeast Mexico, where the UNGPs were first featured in recommendations to local authorities for omissions in ensuring health and safety in the workplace, nondiscrimination and violence against children, and the right to an adequate standard of living, among other human rights violations. 41 A full profile of the case can be found at Human Rights Commission of Nuevo Leon, ‘Mexico: Kia Motors Agrees to Implement UN Guiding Principles to Protect Its Workers’ (BHRRC 14 October 2015) accessed 28 January 2019. 40

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502  Research handbook on human rights and business companies are not necessarily used to, or for which they may not have the necessary awareness and sensibility. Second, NHRIs should have an enhanced role in promoting and developing tailored guidance for the public and business sectors alike, especially in developing countries, where subsidiaries and supply chains of transnationally operating companies are usually located. It is normally taken as a given that businesses (especially those with transnational operations) are in fact aware of the existing global business and human rights framework and utilize these standards throughout their transnational operations. As important recipients of foreign direct investment, the presence of many ‘transnational’ corporations in Mexico should in theory contribute to the dissemination of these standards in practice. However, in many cases this assumption may not hold true42 – a situation which questions the effectiveness of the mainstreaming process revolving around the UNGPs, and of the different actors involved in promoting them. On the other hand, the role of Mexico’s CNDH in business and human rights issues has increased notably since 2015. By issuing reports and general recommendations on different issues that may infringe human rights as a result of corporate activity,43 such as minimum wage,44 or indigenous peoples’ right to free, prior and informed consultation and consent,45 the CNDH has started to provide tailored guidance to federal authorities to raise awareness about their role in regulating the private sector. A notable contribution in this regard is the development of short manuals on the UNGPs and on corporate human rights due diligence,46 which could be instrumental in advancing capacity building in the business sector in Mexico. In compliance with its monitoring role under the first pillar of the UNGPs, NHRIs should have a ‘tailored’ approach to business and human rights, and adapt their working methods and guidance to the specific issues that may be especially relevant to their national context. 3.2

Courting Extraterritoriality? The Proactive Role of Asian NHRIs in Fostering Home Country Control

An interesting dimension that has appeared in the work of NHRIs in the Asia-Pacific region is that of extraterritoriality, particularly in terms of regulatory approach.47 As the two cases that will be briefly analysed in the following paragraphs show, some NHRIs have taken important

Human Rights Council, Report of the Working Group on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises on Its Mission to Mexico (A/HRC/35/32/ Add.2, 27 April 2017) para 16. 43 A ‘general recommendation’ is a recommendation stemming from a perceived ‘structural deficiency’ that leads to human rights violations within a given context. In this regard, they are not the result of individual complaints submitted in relation to an action or omission of the authorities, but rather derive from laws, regulations, policies or practices that are not in conformity with international or constitutional human rights standards. 44 CNDH, Salario mínimo y derechos humanos (27 June 2016). 45 CNDH, Recomendación general No. 27/2016 sobre el derecho a la consulta previa de los pueblos y comunidades indígenas de la República mexicana (11 July 2016). 46 CNDH, Los Principios Rectores sobre las empresas y los derechos humanos (CNDH 2016). 47 Another interesting example is that of New Zealand’s Human Rights Commission; for some comments on its functioning, including the binding character of settlements agreed to within its dispute resolution mechanism, see Jonathan Drimmer and Lisa J Laplante, ‘The Third Pillar: Remedies, Reparations, and the Ruggie Principles’ in Jena Martin and Karen E Bravo (eds), The Business and Human Rights Landscape: Moving Forward, Looking Back (CUP 2016) 327. 42

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National human rights institutions and the business and human rights field  503 steps to foster responsible business conduct even when companies of their nationality operate abroad, as well as to ensure that national governments take a proactive role in curbing human rights abuses of their corporate nationals beyond their territory. As will be seen, this type of practice sends a powerful message as to the possibilities for NHRIs to contribute to the global business and human rights debate, including through extraterritorial oversight of business activities. The Koh Kong Sugar Cane Plantation case was brought before the National Human Rights Commission of Thailand (Thai NHRC) in January 2010,48 in relation to the eviction of Cambodian farmers from their rightfully possessed land by Kohn Kaen Sugar Industry Public Company Limited, a Thai company that through Cambodian subsidiaries gained land concessions in 2006 in violation of Cambodian laws and human rights standards, including ‘illegal confiscation of land from local people, use of force in evictions, killing of livestock, threats and serious intimidation, loss of food security and significant worsening of poverty’.49 Despite the fact that the alleged human rights violation took place beyond the territory of Thailand, the Thai NHRC asserted its jurisdiction over the land-grabbing and related human rights violations on the following basis: In these cases, we look into the role of public and private actors from Thailand in human rights violations that have been reported in development projects in the mentioned neighboring countries. As long as the relevant stakeholder is bound by Thailand’s laws and human rights obligations, the NHRC is committed to serving the interest of justice through human rights promotion and protection. [The] alleged acts are violations of rights and thus fall within the NHRC’s mandate to examine and monitor, and relevant government agencies’ duty to regulate and/or control.50

In its preliminary findings, the Thai NHRC considered ‘that the Thai parent company is involved in the operations of its subsidiaries in Koh Kong, where these breaches took place’.51 This conclusion was upheld in the final report on the case, almost ten years after the facts occurred, where, based on the UNGPs’ approach to corporate responsibility, the Thai NHRC determined: The impact of these human rights violations are in part the direct responsibility of Khon Kaen Sugar Pcl, due to the company’s decision to receive and benefit from land concessions which caused human rights violations, regardless of the fact that the company did not itself commit the act of human rights violation.52

48 See National Human Rights Commission of Thailand, Findings of the Subcommittee on Civil and Political Rights of the National Human Rights Commission of Thailand on the Koh Kong Sugar Cane Plantation Case in Cambodia (25 July 2012), particularly in relation to its jurisdiction over crossborder cases. For a larger profile of the case, including the final report, see EarthRights International, Human Rights Violations in Koh Kong Sugar Plantation Confirmed by Thai Human Rights Commission (3 June 2015) accessed 28 January 2019. 49 National Human Rights Commission of Thailand, Findings of the Subcommittee on Civil and Political Rights of the National Human Rights Commission of Thailand on the Koh Kong Sugar Cane Plantation case in Cambodia (25 July 2012) 1. 50 ibid. 51 ibid 3. 52 National Human Rights Commission of Thailand, Findings Report No 115/2558 (unofficial translation) (10 March 2015), accessed 28 January 2019. 53 ibid. 54 Human Rights Commission of Malaysia (SUHAKAM), Annual Report 2015 (SUHAKAM 2016). 55 Human Rights Commission of Malaysia (SUHAKAM), Annual Report 2015 (SUHAKAM 2016) 96. 56 See, among many other studies, Claire Methven O’Brien, ‘The Home State Duty to Regulate the Human Rights Impacts of TNCs Abroad: A Rebuttal’ (2018) 3 Business and Human Rights Journal 47. 57 Human Rights Committee, Concluding Observations on the Sixth Periodic Report of Germany, adopted by the Committee at its 106th session (15 October–2 November 2012) (CCPR/C/DEU/CO/6, 31 October 2012) para 16; Human Rights Committee, Concluding Observations on the Sixth Periodic Report of Canada (CCPR/C/CAN/CO/6, 20 July 2015). The Committee on Economic, Social and Cultural Rights has also addressed the issue of extraterritoriality in different occasions. See n 7 above.

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National human rights institutions and the business and human rights field  505 transboundary cases – would also be particularly relevant vis-à-vis State-owned enterprises. As explained by Brodie, most cases involving NHRI action (including over human rights abuses abroad) would normally depend on technical expertise and political will;58 yet, these two examples clearly show how NHRIs’ complaints handling capacity can become a useful tool to effectively monitor the fulfilment of State duties and corporate responsibilities in the field of human rights. 3.3

The Kenyan NHRI and Access to Remedy: From Non-judicial to Judicial Remedies

One final example that will be addressed in this chapter is the case of Kenya’s National Commission on Human Rights (KNCHR), especially in relation to a public inquiry undertaken in the Malindi District in relation to salt manufacturing companies.59 In February 2004 the Kubuka Farmers Association submitted a complaint to the KNCHR, alleging that the Provincial Administration and Kurawa Industries had invaded their homesteads and destroyed their property, including their houses, in addition to other alleged human rights violations in relation to the rights to health, violation of workers’ rights, harassment and environmental degradation. The Commission made a fact-finding visit in November 2004, as well as follow-up visits throughout 2005 in order to clearly identify the circumstances and verify the alleged human rights impacts, and held hearings with authorities, the salt companies, experts and the community. The inquiry report clearly pointed out: ‘It is clear that if no interventions are made, corporate businesses will prosper and continue extracting wealth from the community while ploughing back negligible amounts to improve the lives of the community.’60 The report was presented to the President and the National Assembly in 2006, and the KNCHR continued to monitor the implementation of its recommendations by the local authorities and the companies for several years. In 2013, after consultation with local communities, the KNCHR filed a case against the companies for ‘violations of land rights and the right to a clean environment’.61 As can be observed, the facts and original complaint happened several years before the development of the ‘Protect, Respect and Remedy’ Framework and the adoption of the UNGPs. However, it is important to note the relevance of continued monitoring of recommendations made to different stakeholders, and, of course, of filing the case before judicial authorities if other types of remedy are ineffective. While not all NHRIs are vested with the mandate to handle complaints for human rights abuses – and even fewer have jurisdiction over business-related cases – it is important that those that do have the capacity to act as instances for non-judicial remedy do not hesitate to refer cases to judicial authorities should the government or businesses fail to fully comply with their recommendations. If this scenario were to happen again, NHRIs should have the Brodie (n 14) 266–69. The full report of the inquiry can be found at Kenya National Commission of Human Rights, ‘The Malindi Inquiry Report 2006’ accessed 28 January 2019. 60 ibid 183. 61 Nora Götzmann and Claire Methven O’Brien, Business and Human Rights: A Guidebook for National Human Rights Institutions (ICC-DIHR 2013) 68. Unfortunately, it was not possible to locate recent information regarding this case. 58 59

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506  Research handbook on human rights and business (non-discretionary) power to prosecute or submit complaints to the relevant authorities, where the case initially brought before them could be used as evidence. This type of action could ensure that remedies are sought to the fullest extent, allowing potential victims to obtain redress for the damages suffered. 3.4

Possibilities to Enhance the Role of NHRIs as Vehicles for Non-judicial Remedy

As the previous examples show, NHRIs have used different strategies to address business-related human rights abuses where their mandates do not expressly instruct them to conduct oversight beyond State authorities. However, their role as vehicles for non-judicial remedy could be enhanced if a global, standardized approach is adopted at the international level, possibly within the Global Alliance of National Human Rights Institutions (GANHRI), in line with the Edinburgh Declaration of 2010.62 The work of NHRIs in providing tailored guidance to different stakeholders, be they governments, businesses, civil society or victims, in relation to State duties and corporate responsibilities under the UNGPs could be a successful strategy in preventing adverse human rights impacts, a situation that would also curb the need for remedies in the first place. Thus, coordination between NHRIs and other social actors – including business associations, unions, Global Compact regional or national networks, and so on – to build capacity and foster responsible business conduct should be a priority for national human rights institutions, in order to more effectively promote and protect human rights in the context of business activity. Beyond their role in guidance, NHRIs could also contribute directly to the question of access to non-judicial remedy beyond their own complaints handling procedure. In this regard, awareness within NHRIs of the possibility of setting up collaboration schemes with OECD National Contact Points (NCPs)63 is a relevant factor that could improve the likelihood of having at least a second type of procedure available for victims.64 Collaboration could happen on different fronts: for example, in contributing to disseminate the content of the OECD Guidelines for Multinational Enterprises as another standard of reference in relation to business operations with regard to human rights,65 or in the sharing of information on complaints brought before them where they relate to similar or identical facts or parties. Efforts such as those undertaken by Asian NHRIs in relation to extraterritorial regulation, as well as International Coordinating Committee of National Institutions for the Promotion and Protection of Human Rights (ICC), The Edinburgh Declaration (10 October 2010). The Edinburgh Declaration addresses the role of NHRIs in the context of business and human rights, and posits measures in four different areas: promotion, education and research; monitoring; complaints handling; and mediation and conciliation. 63 Drimmer and Laplante (n 47) 337. 64 An agreement between the OECD and GANHRI (formerly ICC-NHRI) has existed since 2012, with the intent of allowing collaboration between OECD National Contact Points and National Human Rights Institutions. However, the success in the implementation of this agreement remains an open question. See Memorandum of Understanding between the Organisation for Economic Co-operation and Development (OECD) and the Association International Coordinating Committee of National Human Rights Institutions (ICC), accessed 28 January 2019. 65 Other aspects could also be addressed beyond Chapter 4 of the OECD Guidelines; for example, situations dealing with environmental protection or labor standards. 62

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National human rights institutions and the business and human rights field  507 by OECD NCPs, who can receive complaints depending on the nationality of the company involved regardless of where the infringement of the OECD Guidelines for Multinational Enterprises took place, could be replicated by other NHRIs when handling cases. Of course, NCPs have only been established by OECD Member States and (the few) other adherents to the Guidelines, which poses an important limitation to their effectiveness; however, the fact that most corporations with transnational operations are based in States that have adhered to the OECD Guidelines for MNEs would allow them to have ‘jurisdiction’ over cases happening abroad; this same approach could be followed by NHRIs. Collaboration between NHRIs and NCPs is not just desirable but necessary, in order to add another procedural layer that could eventually provide a measure of redress to victims. These types of practice should be effectively disseminated by GANHRI, an institution that can play a pivotal role in developing national capacity to address business-related human rights abuses. Fostering international coherence in complaints handling procedures and transnational NHRI cooperation is an important area of opportunity for NHRIs to improve their effectiveness, most notably when that cooperation can lead to cultural change within transnational corporate groups. This can, in effect, give rise to new global alignment trends in the business sector to engage appropriately with NHRIs and victims in search of accountability and reparation.

4.

LOOKING TO THE FUTURE: WHAT ROLE FOR NHRIS IN A POTENTIAL BUSINESS AND HUMAN RIGHTS TREATY?

The role of NHRIs in contributing to the dissemination and implementation of the ‘Protect, Respect and Remedy’ Framework and the UNGPs has been a concern for GANHRI since 2009, when their Working Group on this issue was created, and after 2010, when the draft UNGPs were released for consultation. However, in the current context of discussions and negotiations around a potential business and human rights treaty, their role should also be examined in order to gauge their possibilities of contributing to corporate respect for human rights if and when a treaty is eventually adopted. Of course, the following lines will only address aspects de lege ferenda; however, they are based on currently existing legal frameworks and some of their apparent shortcomings, as well as on initial impressions from the Zero Draft of the Legally Binding Instrument (Zero Draft) and its Draft Optional Protocol (Draft OP or Draft Optional Protocol). In general terms, States have not determined a specific role for NHRIs in most international human rights treaties:66 only one convention (on the rights of people with disabilities) makes an explicit reference to national institutions, particularly in relation to their participation in monitoring implementation of the treaty. Beyond that, two optional protocols have also made

66 Four UN human rights treaty bodies have issued general comments or recommendations regarding the role of NHRIs in monitoring implementation of the treaties or contributing to ensure access to effective remedies: the Human Rights Committee (General Comment 31); the Committee on Economic, Social and Cultural Rights (General Comment 10); the Committee on the Elimination of Racial Discrimination (General Recommendation 17); and the Committee on the Rights of the Child (General Comment 2).

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508  Research handbook on human rights and business reference to the role of NHRIs, although only one of them in its operative text.67 Within the work of human rights treaty bodies, the most advanced pronouncement so far has been made by the Committee on Enforced Disappearances, which issued a document on the relationship between the Committee and NHRIs where several possibilities of engagement and collaboration are prescribed.68 While this limited role of NHRIs under human rights treaty regimes does not necessarily hamper their contribution to the promotion and protection of human rights – after all, their work under international human rights law is prescribed by the already mentioned broad mandate under the Paris Principles – it could lessen their contribution in fostering human rights in business activities and operations as provided by the UNGPs if an eventual treaty does not contemplate a specific role for them. The inclusion of non-judicial remedies would be a novelty if a business and human rights treaty were adopted; indeed, elements beyond legislation and adjudication are commonly viewed by human rights treaty bodies as positive developments to ensure compliance and observance of human rights norms. However, they are not substitutes to those elements, which are deemed quintessential to ensure the guarantee of substantive and procedural rights. In this regard, it is useful to analyse the provisions included in the Zero Draft of the Legally Binding Instrument, as well as in its Draft Optional Protocol, to assess the role that the Chairperson-Rapporteur of the Intergovernmental Working Group foresees so far for NHRIs. The Zero Draft of the Legally Binding Instrument does not mention the role of NHRIs, despite repeated references by different stakeholders in the first three sessions of the Intergovernmental Working Group regarding the role they should perform in the context of a business and human rights treaty. The closest the Zero Draft gets to anything similar to that is in article 9.3 when it stresses the establishment of effective national procedures, and in article 15.1, where it refers to adequate monitoring mechanisms; however, both national procedures and monitoring mechanisms can refer to administrative processes performed or overseen by the State, and not necessarily to NHRIs. On first glance, this could potentially be a missed opportunity, given the important role that NHRIs are called to play to ensure a smooth interaction between international and domestic legal regimes, as well as to monitor State compliance with international human rights law. In addition, the important role they can perform in the business and human rights field, through the three competences highlighted above, would be a powerful argument to secure a role for them in the prospective business and human rights treaty. Despite this omission, a Draft Optional Protocol to the Legally Binding Instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises was published a few weeks in advance of the fourth session of the Open-Ended Intergovernmental Working Group, which did include a specific role for NHRIs in the context of a business and human rights treaty.69 A general clause to that effect is set forth Optional Protocol to the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment, article 18.4 (also on the monitoring role that NHRIs can play in relation to the Convention); Optional Protocol to the Convention on the Rights of the Child on a communications procedure, where it highlights in its preamble the important role to play by NHRIs in relation to access to remedies. 68 Committee on Enforced Disappearances, ‘The Relationship of the Committee on Enforced Disappearances with National Human Rights Institutions’ (CED/C/6, 28 October 2014). 69 Despite not agreeing entirely with some of its comments, see Gabriela Kletzel et al, ‘A Toothless Tool? First Impressions on the Draft Optional Protocol to the Legally Binding Instrument on Business and Human Rights’ (Reflections on the Zero Draft (BHRRC)) accessed 28 January 2019. 70 Article 9 of the Zero Draft establishes the State obligation to ensure in its domestic legislation that all transnational business activities are exercised with adequate human rights due diligence.

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510  Research handbook on human rights and business to transpose in its domestic legislation the duty of business enterprises to undertake human rights due diligence procedures, and to ensure that effective national procedures are in place to enforce compliance with them. But there are no references in article 9 of the Zero Draft to obligations imposed directly upon business enterprises. In this regard, taking into consideration the coexistence in article 9 of the Zero Draft of a direct obligation for the State and an indirect effect upon business enterprises (which would evidently become a direct corporate legal obligation under domestic law), the current wording of Draft OP’s article 5 would require some modifications to ensure that it clearly stipulates that the competence entrusted upon the National Implementation Mechanism relates to monitoring the implementation of human rights due diligence by business enterprises. In this way, the function of NHRIs would serve to complement the monitoring role that should be exercised by the State, in a complementarity exercise that could yield positive results to enhance human rights protection in the business sphere. A third function for NHRIs is provided in article 6, which identifies one of the most important mechanisms to address business-related human rights violations: the complaints handling mechanism. The provision sets forth that States Parties may recognize the competence to receive and consider complaints of human rights violations alleged to have been committed by business enterprises operating transnationally.71 It then goes on to describe the main characteristics of the procedure to be followed by those National Implementation Mechanisms that have such a mandate: first, it sets out the possibility to initiate an investigation over the complaint received, with an important additional element in the fact that it shall be brought to the attention of both the business enterprise and the State party concerned. While some NHRIs have the competence to engage businesses directly through their complaints handling mandate, the most recurrent framework allows them to engage governmental authorities only (and in some cases, State-owned enterprises). Thus, this could serve to develop a generalized approach for complaints-handling mechanisms, with the possibility of engaging both actors in a non-judicial procedure. Within this mandate, the Draft OP points out that NHRIs shall have the competence to request and receive information and testimony from States Parties and other sources (including NGOs, the concerned business and other actors); to conduct visits or inspections to the place where the violation occurred or is taking place; and to transmit to the relevant State party any request for interim measures for alleged victims. In addition, it sets out the possibility of reaching amicable settlements, and to monitor ex officio its compliance by the parties, a default on which could imply its referral to the treaty body that is stipulated by the protocol. While the intention set forth in the Draft OP is laudable, several aspects would require attention, with the first and most notable being the lack of precision as to what the National Implementation Mechanism could do if it is not possible for the parties to reach an amicable settlement. In many cases, NHRIs can issue non-binding recommendations to authorities to address the alleged human rights violation, with a view to ensuring reparation and non-repetition. This would be an approach that would coincide with currently existing com-

71 However, it must be borne in mind that not all NHRIs have this function, which is considered as complementary to the general aspects included in the Paris Principles; thus, it may not necessarily be a tool readily available for all NHRIs, even if their States were to become parties to both the legally binding instrument and its optional protocol.

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National human rights institutions and the business and human rights field  511 plaints handling mechanisms; however, the fact that a private actor would be involved in this procedure would require that a relatively different focus be pursued. A possibility already foreseen in the Draft OP, specifically in relation to the review function of human rights due diligence procedures, could be useful in this regard: a NHRI could issue a recommendation to both the State and the business enterprise concerned, with lack of compliance by the business enterprise being subject to referral to the relevant State authorities;72 in the case of lack of compliance by the State, the NHRI should be able to submit the relevant information to the treaty body established by the Draft OP, for it to consider during its periodic monitoring of States Parties. This two-tiered monitoring system could be useful to foster compliance by the different parties involved, and to more clearly delineate the full extent of competences of NHRIs under the Draft Optional Protocol. Despite these interesting provisions and developments, it would be convenient – and potentially preferable – to include a specific reference regarding the competences of NHRIs in the body of the draft text, or at least an acknowledgement of their potential contribution to the implementation of the treaty, that could then be complemented by the more detailed aspects included in the Draft Optional Protocol. It would also be important to ensure that NHRIs have a specific role to play vis-à-vis the potential treaty body that could be created by the treaty (or the optional protocol), either in submitting information in relation to individual communications brought to the attention of the treaty body, by presenting a ‘shadow’ report for the examination of States Parties’ reports, or in monitoring concluding observations or urgent measures issued by the treaty body. In that sense, NHRIs could serve as a liaison between the State and the treaty body to ensure more effective cooperation in fulfilling the former’s obligations under the treaty, as well as in providing access to effective (non-judicial) remedies and redress to victims of business-related human rights abuses.

5.

FINAL THOUGHTS

This chapter has sought to illustrate the evolving role that national human rights institutions have had in the field of business and human rights, particularly during the SRSG mandate and after the adoption of the UN Guiding Principles on Business and Human Rights. As was seen in the case studies from the Americas, Asia and Africa, NHRIs can contribute in numerous ways to raise awareness in the different circles of society in relation to the State duty to protect human rights and the business responsibility to respect them, and ensure their respect in relation to their supply chains. This function can potentially be complemented by a non-judicial mechanism for victims to seek remedy – where they have the capacity to do so – regardless of the fact that their mandate may or may not include a provision allowing them to review cases related to business operations. In this regard, ensuring that NHRIs are aware of the possibility of holding businesses indirectly accountable for their participation in human rights abuses, via State omission, is a necessity to which the Global Alliance of National Human Rights Institutions can contribute.

While the text of article 6.6 of the Draft OP does mention that noncompliance with the agreement may result in the presentation of appropriate judicial or administrative procedures against the noncomplying party, this should not be left for States to decide. 72

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512  Research handbook on human rights and business Should a treaty on business and human rights be adopted in the near (or the far) future, NHRIs should have their role(s) clearly recognized in the corresponding international instrument(s), in order to complement the existing options to reduce the accountability gap that currently exists in this field. Only through cooperative and coercive measures – that is, through a ‘smart mix’ of measures – will hope for remedy transform into a reality for victims. To that end, NHRIs should be called to become primary actors, and to play a large role in the promotion and protection of human rights in the business sphere.

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24. Atrocities and victim redress: the opportunities and challenges of international criminal justice Joanna Kyriakakis

1. INTRODUCTION International criminal law, sometimes referred to as atrocity law, is a set of principles and procedures through which the international community demonstrates its opprobrium for international crimes: conduct considered to amount to the ‘most serious crimes of concern to the international community’.1 Broadly, these crimes encompass four categories of prohibited conduct:2 crimes against humanity (specified conduct that is part of a widespread or systematic attack against civilians),3 genocide (specified conduct that aims to destroy a protected group),4 war crimes (grave violations of the laws of armed conflict)5 and aggression (state resort to international use of force where it is impermissible under international law).6 Crimes of this nature are typically enabled by either state failure or state abuse of power. They tend to occur in contexts involving widespread and systematic human rights abuses, and often necessitate significant authority and capacity on the part of the offender group to impact victims at the scale, or with the systematicity, these harms involve. In recent years, there has been increasing attention to the question of how international criminal law can and should be better directed towards business involvement in international crimes. Put differently, there is growing interest in what international criminal justice offers as a redress mechanism for dealing with economic actors involved in atrocity. The reasons for this turn to international criminal law are many, but the starting point is the fact that, in the contemporary global economy, corporate economic actors can (and demonstrably sometimes do) participate in, and benefit from, atrocity crimes. At the same time, attention to the role of the victim and of victim interests in international criminal law is also maturing. From what was primarily a retributive justice system in which the role of the victim was largely symbolic, international criminal justice is gradually shifting towards a more victim-oriented focus, both

1 Rome Statute of the International Criminal Court (opened for signature 17 July 1998, entered into force 1 July 2002) 2187 UNTS 90 (Rome Statute) Preamble. 2 There are debates over what constitute international crimes; however, the most common definition is those offences giving rise to criminal responsibility directly under international law: Roger O’Keefe, International Criminal Law (OUP 2015) 51. On definitional debates, see Robert Cryer and others, An Introduction to International Criminal Law (4th edn, CUP 2019) 4–8. 3 See, for example, Rome Statute (n 1) Article 7. 4 See, for example, ibid art 6; Convention on the Prevention and Punishment of the Crime of Genocide (opened for signature 9 December 1948, entered into force 12 January 1951) 78 UNTS 277 (Genocide Convention) art 2. 5 See, for example, Rome Statute (n 1) art 8. 6 See, for example, ibid Article 8 bis.

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514  Research handbook on human rights and business procedurally and in terms of its substantive goals.7 This is most evident in the work of some contemporary international criminal courts, which demonstrate an emerging emphasis upon victim participation in trials and upon creative and diversified reparative schemes. The coalition of these different trends, together with the unique enforcement model of international criminal law, raises interesting possibilities in the context of the broader business and human rights dialogue. As contemplated under Pillar III of the United Nations (UN) Guiding Principles on Business and Human Rights (the Guiding Principles),8 the right of victims to access effective remedies for business-related human rights abuses is crucial to the business and human rights project. International criminal law may have a small but important role to play in the matrix of remedial mechanisms contemplated by Pillar III where business abuses are egregious. Given the increasingly victim-oriented focus of the international criminal justice system, this chapter explores that potential from the perspective of Pillar III. There are, of course, obvious limits to the extent to which international criminal law can provide an effective remedy to victims of corporate human rights violations. Foremost among these are the limited range of human rights abuses that overlap with the corpus of international crimes and the limited jurisdiction of most international criminal courts, which exclude corporate defendants.9 Moreover, the application of international criminal law continues to be piecemeal, even in respect of its more traditional subjects. Nonetheless, this chapter explores what international criminal justice might offer to victim communities impacted by egregious business-related human rights abuses and the expectation encapsulated in the victim right to effective remedy. The chapter is structured as follows. Section I reviews Pillar III and the right of victims to access effective remedies for business-related human rights abuses, highlighting certain features of that right that may be relevant to an assessment of international criminal law as a meaningful redress mechanism. This part draws on recent elaborations of Pillar III, to flesh out the expectations it establishes. Section II then discusses some of the reasons for the turn to international criminal law as a human rights enforcement mechanism in the area of business and human rights and its growing potential to engage in that space. The latter includes recent intimations by the Office of the Prosecutor of the International Criminal Court of an intention to look at cases of a kind likely to implicate business. This part also highlights some of the relative strengths and weaknesses of international criminal law as a means of remedy for business-related human rights violations. Section III then considers how the growing valuation of the victim in international criminal law and practice might interplay with the field’s potential in the business and human rights context. It focuses in particular upon the emergence of reparative schemes that demonstrate the potential for diversified forms of victim repair following, or alongside, international criminal trials.

On this shift generally in the context of the ‘humanisation of international law’, see Theo van Boven, ‘Victim-Oriented Perspectives: Rights and Realities’ in Thorsten Bonacker and Christoph Safferling (eds), Victims of International Crimes: An Interdisciplinary Discourse (Asser Press 2013). 8 UNHRC, ‘Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework’ (UN Doc A/HRC/17/3, 2011). 9 In the context of the International Criminal Court, for example, see Rome Statute (n 1) Article 25(1). 7

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The opportunities and challenges of international criminal justice  515

2.

THE RIGHT OF VICTIMS OF BUSINESS-RELATED INTERNATIONAL CRIMES TO AN EFFECTIVE REMEDY

The right of victims of human rights abuses to an effective remedy is well established under international law.10 In cases of abuses that constitute international crimes, the 2006 UN Basic Principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross Violations of Human Rights Law and Serious Violations of International Humanitarian Law (Basic Principles) are particularly instructive.11 The Basic Principles provide that the remedial rights of victims encompass three core qualities: (a) equal access to an effective judicial remedy; (b) adequate, effective and prompt reparation for harm suffered; and (c) access to relevant information concerning violations and reparation mechanisms.12 The Basic Principles confirm existing state obligations under international law to organise domestic law and practice in a way that enables victims to exercise these elements of the right to remedy and reparation, such as by recognising legitimate foreign state judgments with reparative dimensions.13 Regarding effective reparation, the Basic Principles makes it clear that these should take multiple forms, including providing material repair to victims through restitution and compensation, as well as symbolic repair aimed at victim satisfaction and guarantees of non-repetition. Examples of the latter might include censuring atrocities through judicial determinations that restore the dignity of victims and imposing sanctions against those liable.14 With respect to violations that constitute international crimes, Principle 4 confirms that: States have the duty to investigate and, if there is sufficient evidence, the duty to submit to prosecution the person allegedly responsible for the violations and, if found guilty, the duty to punish her or him. Moreover, in these cases, States should, in accordance with international law, cooperate with one another and assist international judicial organs competent in the investigation and prosecution of these violations.

States are also expected to implement universal jurisdiction domestically and to facilitate extradition or surrender of international criminal law offenders, where required by international law.15 These international law duties apply whether the offender is a private or public actor.16 Principle 15 also makes it clear that where any person, including a legal person, is found liable for an international crime, they should provide reparations to the victim or, in cases where the state has already done this, they should provide reparations to the state. The Basic Principles thus set up the expectation that judicial processes will be applied to abuses

For an outline of core sources of this right and reflections as to their implications for business-related human rights abuses, see UNHRC, Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie, Addendum, ‘State obligations to provide access to remedy for human rights abuses by third parties, including business: an overview of international and regional provisions, commentary and decisions’ (UN Doc A/HRC/11/13/Add.1, 2009). 11 UNGA Res 147 (21 March 2006) UN Doc A/RES/60/147. 12 UNHRC, ‘Guiding Principles on Business and Human Rights’ (n 8) Principle 11. 13 ibid, Principle 17. 14 ibid, Principles 19–23. 15 ibid, Principle 5. 16 UNHRC, Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises (n 10) 2–3. 10

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516  Research handbook on human rights and business involving gross violations under international human rights and humanitarian law, and moreover that criminal law processes in particular will be applied (at least in respect of natural persons) where such a violation is sufficiently egregious. In the context of the Guiding Principles, Pillar III articulates the right of victims of business-related human rights abuses to access remedy. The foundational principle is Principle 25, which provides that ‘[s]tates must take appropriate steps to ensure, through judicial, administrative, legislative or other appropriate means, that when [business-related human rights] abuses occur within their territory and/or jurisdiction those affected have access to effective remedy’. The Guiding Principles thus acknowledge a role for a wide range of grievance mechanisms to fulfil the right of victims to access a remedy, including a role for mechanisms established at the business operational level. Remedial mechanisms are categorised in the Guiding Principles as state judicial, state nonjudicial and non-state non-judicial mechanisms. Which category is most appropriate in any given case depends upon the circumstances and more than one category might reasonably be pursued. State judicial remedies refers to formal court processes that involve a judicial determination of the case. State non-judicial remedies refers to any other routinised state delivered processes that can be accessed by victims for a similar assessment but that fall short of a judicial determination, such as ombudsman interventions, government complaint offices or interventions by national human rights institutions. Non-state mechanisms refers to grievance mechanisms established by businesses themselves, potentially through collaboration with appropriate partners, that allow the victim to seek resolution of their concern directly with the businesses involved.17 Unlike the Basic Principles, the Guiding Principles do not expressly state that a criminal justice response is necessarily demanded in cases involving gross violations, such as international crimes.18 For example, while the commentary to Guiding Principle 26 confirms that states must ‘ensure that they do not erect barriers to prevent legitimate cases from being brought before the courts in situations where judicial recourse is an essential part of accessing remedy’, it does not articulate when judicial recourse is essential. According to the commentary to Guiding Principle 27, dealing with state-based non-judicial grievance mechanisms, ‘judicial remedy is not always required; nor is it always the favoured approach for all claimants’. The commentary to Guiding Principle 29 likewise does not rule out the applicability of operational-level grievance mechanisms to particularly egregious abuses. Having said this, it is made clear that non-judicial grievance mechanisms cannot serve to preclude access to judicial mechanisms.19 More generally, victim access to state-based judicial mechanisms is described as sitting ‘at the core of ensuring access to remedy’.20 It is thus implicit in the Guiding Principles that a judicial, and potentially a criminal or quasi-criminal, process must be applied to credible cases of gross violations.21 Indeed, this

UNHRC, ‘Guiding Principles on Business and Human Rights’ (n 8) Principles 26–29. For a discussion of how gross violations of international crimes include but are not limited to international crimes, see International Commission of Jurists, Needs and Options for a New International Instrument in the Field of Business and Human Rights (June 2014) 2325; Shane Darcy, ‘The Potential Role of Criminal Law in a Business and Human Rights Treaty’ in Surya Deva and David Bilchitz (eds), Building a Treaty on Business and Human Rights: Context and Contours (CUP 2017) 445–50. 19 UNHRC, ‘Guiding Principles on Business and Human Rights’ (n 8) Commentary to Principle 29. 20 ibid, Commentary to Principle 26. 21 See also Darcy (n 18) 450–51. 17 18

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The opportunities and challenges of international criminal justice  517 much may flow from reading the Guiding Principles holistically.22 For example, the commentary to Principle 22 provides that ‘[s]ome situations, in particular where crimes are alleged, typically will require [corporate] cooperation with judicial mechanisms’.23 There is little expressly stated under Pillar III about situations where a victim’s access to the territorial states’ judicial systems is unlikely. However, the state duty to protect human rights (Pillar I) and its duty to facilitate victim access to remedy (Pillar III) are interrelated and both have purchase in transnational contexts. It has therefore been argued that, viewed holistically, the implication of the Guiding Principles is that ‘in extraterritorial situations, States should cooperate in order to ensure that any victim of the activities of non-State actors that result in a violation of human rights has access to an effective remedy, preferably of a judicial nature, in order to seek redress’.24 Moreover, the commentary to Principle 2, which encourages states to set out expectations that businesses domiciled in their territory respect human rights throughout their global operations, recognises that one way of doing so is through enabling criminal prosecutions of corporate nationals utilising extraterritorial jurisdiction. For businesses operating in conflict-affected areas, states are advised to review their regulation and enforcement mechanisms to ensure they are effective in addressing business involvement in gross human rights abuses.25 This should include ‘exploring civil, administrative or criminal liability for enterprises domiciled or operating in their territory and/or jurisdiction that commit or contribute to gross human rights abuses’.26 All this seems to suggest that states must ensure judicial mechanisms are available to victims where a complaint involves allegations of crimes and that such mechanisms must provide for effective and appropriate remedies that reflect the severity of the harm. Indeed, to conform to international treaty law, states are obliged to apply their criminal law to certain human rights abuses where the offender is a natural person, though there is some latitude for states to apply quasi-criminal, civil or administrative sanctions to legal persons if that is necessary according to the domestic legal systems.27 Ideally, however, the obligation to ensure that criminal law or comparable alternative sanctions are available for certain abuses would have been stated explicitly in the Principles as part of the state’s duty under Pillar III. The focus of the Guiding Principles is generally more upon the effectiveness criteria for grievance mechanism processes, rather than what substantively amounts to an effective remedy. As the UN Working Group on Business and Human Rights has noted, while there is a close correlation between an effective process and obtaining an effective remedy, these two aspects of remedy are nonetheless distinct.28 Of the three pillars of the UN Guiding Principles, the right to access remedy has been particularly in need of elaboration and a number of

The UN Working Group on Business and Human Rights has confirmed that this is the correct way of reading the Guiding Principles: UNGA, Report of the Working Group on the issue of human rights and transnational corporations and other business enterprises (72nd sess UN Doc A/72/162, 18 July 2017) UN Working Group Remedy Report [57]–[59]. 23 UNHRC, ‘Guiding Principles on Business and Human Rights’ (n 8) Commentary to Principle 22. 24 Gwynne Skinner et al, The Third Pillar: Access to Judicial Remedies for Human Rights Violations by Transnational Business (December 2013) 30. 25 UNHRC, ‘Guiding Principles on Business and Human Rights’ (n 8) Principle 7. 26 ibid, Commentary to Principle 7. 27 Darcy (n 18) 442–45, 453–57 and 463–68. 28 UN Working Group Remedy Report (n 22) 3. 22

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518  Research handbook on human rights and business recent projects have focused on doing so.29 Key among these are the UN Office of the High Commissioner for Human Rights’ (OHCHR) Accountability and Remedy Project,30 and recent work of the UN Working Group on Business and Human Rights.31 These projects have resulted in further and better particulars as to the contours of the expectations Pillar III creates and what it demands by way of state action. Together with the broad principles set out above, they suggest a unique but crucial role for international criminal law. For example, in its guidance to states to improve accountability and access to remedy of business-related human rights abuses, the OHCHR has specified that for public law offences, domestic public law regimes must be ‘sufficiently detailed and robust to ensure that there is both effective deterrence from and effective remedy in the event of business-related human rights abuses’.32 Public law offences are defined broadly, to incorporate not only offences under a state’s criminal law, which are directed at punishing harmful or anti-social behaviours, but also administrative, regulatory or quasi-criminal law regimes, given some states do not recognise the criminal responsibility of corporations.33 The obligation to provide effective deterrence and effective remedy in cases involving such crimes requires that legislative, regulatory and policy measures be appropriate to the ‘type, nature and severity of different business-related human rights impacts’34 and ‘make appropriate provisions for corporate criminal liability, or its functional equivalent, in cases where business-related human rights impacts are severe’.35 Moreover, legal sanctions that follow a determination of corporate liability should be ‘proportional to the gravity of the abuse and the harm suffered; … reflect the culpability of the relevant company … [and be] sufficiently dissuasive to be a credible deterrent to that company, and others’.36 Also instructive is the UN Working Group on Business and Human Rights’ ‘all roads to remedy’ approach. This concept seeks, among other things, to highlight the need for diverse actors to work towards the achievement of effective remedies and to locate remedies within diverse settings in order for Pillar III to be achieved.37 With respect to states, for both normative and practical reasons, the ‘all roads to remedy’ approach means engaging with the question of effective victim remedies not only in their individual efforts but also in collective fora.38 The idea presses states, and other actors, to engage the international criminal justice system as part of their holistic efforts to achieve appropriate victim remedies in cases involving egregious business-related human rights abuses. International criminal law, and the unique enforcement system it establishes (discussed further below), has normative and pragmatic purposes that UNHRC, ‘Improving Accountability and Access to Remedy for Victims of Business-related Human Rights Abuse: Report of the United Nations High Commissioner for Human Rights’ (UN Doc A/ HRC/32/1, 10 May 2016) OHCHR Remedy Report 8. 30 ibid. See also, UNHRC, ‘Improving Accountability and Access to Remedy for Victims of Business-related Human Rights Abuse: Explanatory Notes for Guidance’ (UN Doc A/HRC/32/19/ Add.1, 12 May 2016) OHCHR Remedy Report Addendum. The OHCHR Remedy Report has been endorsed by the Human Rights Council: HRC Res 32/10 (30 June 2016) UN Doc A/HRC/RES/32/10. 31 See, for example, UN Working Group Remedy Report (n 22). 32 OHCHR Remedy Report (n 29) Annex, Principle I. 33 OHCHR Remedy Report Addendum (n 30) 5–6. 34 OHCHR Remedy Report (n 29) Annex, Principle 1.1. 35 ibid, Annex, Principle 1.2. 36 ibid, Annex, Principle 11.2. 37 UN Working Group Remedy Report (n 22) 60–75. 38 ibid, 61–64. 29

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The opportunities and challenges of international criminal justice  519 might logically be extended to business-related international crimes.39 Indeed, as noted in Section II below, the proposal that international courts enforcing international criminal law should engage with violations in business contexts is increasingly being explored. There is also the UN Working Group’s concept of a ‘bouquet of remedies’. This concept places the same emphasis as set out in the Basic Principles upon full and effective reparation, meaning that multiple forms of remedies ‘should be concurrently available to the affected persons and communities’.40 As discussed in Section III below, the growing reparative dimensions of international criminal justice processes, which are directed at both individual and collective victims, may link to this goal. Moreover, the Working Group confirms that compensation must ‘be fair and proportional to the gravity of the harm suffered and never offered in lieu of potential criminal liability’ and might be awarded as part of a criminal process.41 It acknowledges the unique complexities around the appropriateness of private compensation agreements in the context of harms involving crimes;42 requires compensation to be sufficient so as to have a deterrent effect;43 and highlights that it is critical for states to bring investigations and prosecutions for corporate crime in order to achieve victim satisfaction and guarantees of non-repetition, two core aspects of the victim right to full and effective reparation.44 Both of these concepts, the ‘all roads to remedy’ approach and the ‘bouquet of remedies’ notion, are manifestations of the Working Group’s insistence ‘that rights holders should be central to the entire remedy process, including to the question of effectiveness’.45 All this is simply to say that states must utilise all mechanisms available to them, at both the domestic and the international level, which includes criminal law. There have also been significant recent efforts towards a binding business and human rights treaty. This process too highlights the role for criminal law where wrongs of a certain nature have been committed, or contributed to, by business. The Zero Draft treaty was released in July 2018 by the UN Human Rights Council’s Open-ended Intergovernmental Working Group on transnational corporations and other business enterprises with respect to human rights (OEIGWG), followed by a Draft Optional Protocol.46 Article 10(1) of the Zero Draft provided: State Parties shall ensure through their domestic law that natural and legal persons may be held criminally, civil or administratively liable for violations of human rights undertaken in the context of business activities of transnational character. Such liability shall be subject to effective, proportionate, and dissuasive criminal and non-criminal sanctions, including monetary sanctions. Liability of legal persons shall be without prejudice to the liability of natural persons.

See, for example, Joanna Kyriakakis, ‘Corporations before International Criminal Courts: Implications for the International Criminal Justice Project’ (2017) 30 Leiden Journal of International Law 221. 40 UN Working Group Remedy Report (n 22) (38). 41 ibid 45. 42 ibid 46. 43 ibid 47. 44 ibid 50–53. 45 ibid 19. 46 Legally Binding Instrument to Regulate, in International Human Rights Law, the Activities of Transnational Corporations and other Business Enterprises, Zero Draft 16.7.2018. The OEIWG has a mandate to elaborate the text of a treaty pursuant to the Human Rights Council’s Resolution A/ HRC/26/L.22/Rev.1 (25 June 2014). 39

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520  Research handbook on human rights and business Paragraphs 8–12 of Article 10 then elaborated state duties in respect of criminalisation. They provided that states must establish criminal liability ‘for all persons with business activities of a transnational character that intentionally, whether directly or through intermediaries, commit human rights violations that amount to a criminal offence’.47 While the provisions on criminalisation are welcome, the drafting of the Zero Draft did raise questions of scope. For example, the Zero Draft envisaged criminalisation as a necessary state response to all human rights abuses that constitute ‘crimes recognized under international law, international human rights instruments, or domestic legislation’.48 It is not clear how crimes under international human rights instruments differ from crimes under international law. But more notable is the inclusion of domestic crimes, which is surprisingly wide for a treaty of this nature and, as Lopez notes, left ‘open a large window for divergent and potentially arbitrary approaches’.49 This is problematic given that any international treaty would ideally contribute to ‘increased convergence of legal standards and approaches’ in order to facilitate clarity for businesses and avoid the ‘race to the bottom’ phenomenon.50 Another concern was that, by limiting the draft treaty to business activities of a transnational character, purely domestic businesses are excluded from the duty to criminalise certain conduct, even where such conduct amounts to international crimes.51 Unclear too were the implications of the condition that any conduct must be intentional in order to activate the duty to criminalise, which may limit criminalisation where certain modes of liability would not otherwise be so circumscribed. To illustrate, aiding and abetting does not ordinarily require intention on the part of the offender as to the commission of a specific offence.52 It is one of the most common forms of liability alleged in respect of business and atrocity, and so circumscribing its parameters below those recognised under customary international law would be disappointing.53 Despite these uncertainties, 47 Zero Draft Treaty (n 46) Article 10(8). The Revised Draft issued in July 2019 resolves many of the problems discussed below. ‘OEIGWG Chairmanship Revised Draft 16.7.2019.14’, Article 6, accessed 31 March 2020. 48 ibid. 49 Carlos Lopez, ‘Towards an International Convention on Business and Human Rights (Part II)’ (OpinioJuris, 23 July 2018) accessed 10 February 2019. 50 ICJ (n 18) 34–35. 51 Carlos Lopez, ‘Towards an International Convention on Business and Human Rights (Part I)’ (OpinioJuris, 23 July 2018) accessed 10 February 2019. 52 Under customary international law, aiding and abetting involves the giving of ‘practical assistance, encouragement, or moral support which has a substantial effect on the perpetration of the crime’, together with ‘the knowledge that these acts assist in the commission of the offence’: Furundžija (Judgment) IT-95-17/1- T (10 December 1998), para 249. There is no requirement that the accomplice shared the principal’s intent to commit the crime nor that they had been driven in their conduct by an intent to assist in that crime: Vasiljevic (Judgment) IT-98-32-T (29 November 2002), para 71; Mrkšić and Šljivančanin (Appeal Judgment) IT-95-13/1-A (5 May 2009), para 159. 53 For a discussion of modes of liability that may be particularly pertinent in business contexts, and critiques of unduly limiting their scope, see H Vest, ‘Business Leaders and the Modes of Individual Criminal Responsibility under International Law’ (2010) 8 Journal of International Criminal Justice 851; N Farrell, ‘Attributing Criminal Liability to Corporate Actors: Some Lessons from the International Tribunals’ (2010) 8 Journal of International Criminal Justice 873; P Ambach, ‘International Criminal Responsibility of Transnational Corporate Actors Doing Business in Zones of Armed Conflict’ in F Baetens (ed), Investment Law within International Law: Integrationist Perspectives (CUP 2013).

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The opportunities and challenges of international criminal justice  521 what is clear is that criminal law was viewed by the OEIGWG as crucial for addressing certain human rights abuses in business contexts. With regard to legal persons and liability, the Zero Draft took a pragmatically cautious approach common to a number of other international instruments. It allowed that states that do not recognise corporate criminal liability could adopt non-criminal sanctions, provided they are ‘effective, proportionate and dissuasive’.54 A number of states around the world had traditionally rejected the proposition that non-human entities can commit crimes and be subject to criminal punishment.55 While this situation is changing, with more civil law states adopting domestic corporate criminal liability schemes,56 deference to diversity among domestic legal traditions might be justified on a number of grounds. This includes the potential that such deference and flexibility will encourage state engagement with the treaty and its goals.57 It might also be justified on the basis of the expressive or didactic function of criminal law. If criminalisation is in part about the communication of values to specific audiences, then the legal norms that are relevant to that audience matter.58 In other words, local legal signification should be taken into account when evaluating the likely reception of legal practices.59 It is also worth noting here a parallel effort towards an international treaty on crimes against humanity, which would oblige states to criminalise such conduct domestically. As developed and recommended by the International Law Commission, this treaty would also require states to establish the liability of legal persons, but again provides latitude to domestic legal traditions.60 Specifically, draft Article 6[8] provides: ‘Subject to the provisions of its national law, each State shall take measures, where appropriate, to establish the liability of legal persons for the offences referred to in this draft article. Subject to the legal principles of the State, such liability of legal persons may be criminal, civil or administrative.’ The clear thrust of these international treaty developments is that criminalisation must be among the remedial mechanisms available to victims of business-related human rights abuses where the gravity and nature of the abuse requires it. Such mechanisms must be directed against both the relevant natural and legal persons implicated in the wrong, with the exception that something functionally equivalent to criminalisation is allowed in relation to legal persons where the domestic legal tradition demands it.

Zero Draft Treaty (n 46) Arts 10(10) and 10(12). This approach has been maintained in the Revised Draft, note 47, Article 6(4) and 6(7). 55 M Engelhart, ‘Corporate Criminal Liability from a Comparative Perspective’ in D Brodowski et al (eds), Regulating Corporate Criminal Liability (Springer 2014). 56 ibid. 57 For a discussion of the merits of this approach in the context of the International Criminal Court, see Larissa van den Herik, ‘Corporations as Future Subjects of the International Criminal Court: An Exploration of the Counterarguments and Consequences’ in C Stahn and L van den Herik (eds), Future Perspectives on International Criminal Justice (TMC Asser Press 2010) 361–62. 58 For a discussion of the turn to, and limits of, expressivist strands of thought as a justifying function of international criminal justice, see Barrie Sander, ‘The Expressive Limits of International Criminal Justice: Victim Trauma and Local Culture in the Iron Cage of the Law’, iCourts Working Paper Series No 38, 2016. 59 The challenge with this proposition is the question of who is the intended audience for the purpose of social messaging in cases involving international and transnational crimes. 60 ILC, ‘Report of the International Law Commission, Seventy-first session (29 April – 7 June and 8 July – 9 August 2019)’, UN Doc. A/74/10 (2019), 14. 54

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522  Research handbook on human rights and business Finally, at the European level, the case for the necessity of a criminal or quasi-criminal legal response to egregious business-related human rights abuses is also being built by states themselves. Both the Council of Europe and the European Union are pressing member states to adopt and implement legislation and related measures to ensure business enterprises and individual business officials can be held liable under criminal law or a functional equivalent for the crimes of genocide, crimes against humanity and war crimes, as part of meeting their commitments under the Guiding Principles.61 This must extend to expending greater effort towards effective investigations as understood under the European Convention on Human Rights and in communicating reasoned decisions to victims regarding decisions about business prosecutions.62 The European Union Agency for Fundamental Rights has noted a general failure of law enforcement agencies to date to explore the full potential of criminal law to address serious business violations of human rights.63

3.

THE POTENTIAL OF INTERNATIONAL CRIMINAL LAW AS A BUSINESS AND HUMAN RIGHTS ENFORCEMENT MECHANISM

As mentioned above, international criminal law adopts a unique enforcement model, which is largely justified by the gravity and qualities of international crimes. It involves the creation of specialised temporary courts to prosecute international crimes that have occurred in specific conflict contexts or, in the case of the International Criminal Court (the ICC), in any ongoing or future contexts involving especially grave examples of international crimes on the territory, or by a national, of a state party to the Court.64 International criminal justice is also increasingly understood as a decentralised form of justice, meaning states are encouraged to take up the challenge of prosecuting offenders in their own domestic criminal courts, utilising permissible extended jurisdictional grounds.65 This idea is best reflected in the complementarity regime of the ICC, which gives the ICC the authority to hear cases only where states with jurisdiction are unwilling or unable to act.66 The justifications for empowering alternative and potentially multiple fora to hear cases involving international crimes are many. They include the nature of international crimes being such as to press against the likely efficacy of leaving the matter

61 Council of Europe, ‘Recommendation CM/Rec (2016) 3 of the Committee of Ministers to Member States on Human Rights and Business’ (adopted 2 March 2016) [1249 meeting] [44]–[46]; European Union Agency for Fundamental Rights, ‘Improving Access to Remedy in the Area of Business and Human Rights at the EU Level’ (FRI Opinion – 1/2017, 10 April 2017) 40–42. 62 Council of Europe, ‘Explanatory Memorandum to Recommendation CM/Rec (2016) 3 of the Committee of Ministers to Member States on Human Rights and Business’ (1249 meeting, CM Doc. CM(2016)18-addfinal, 2 March 2016) 67–76. 63 European Union Agency for Fundamental Rights, ‘Improving Access to Remedy in the Area of Business and Human Rights at the EU Level’ (FRI Opinion – 1/2017, 40–46, 10 April 2017). 64 The International Criminal Court (ICC) can also exercise universal jurisdiction where it is referred a matter by the UN Security Council. For the jurisdictional limits of the ICC, see: Rome Statute (n 1) Articles 5, 11–13. 65 Cryer and others (n 2) chapters 3 and 4. 66 Rome Statute (n 1) Articles 17.

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The opportunities and challenges of international criminal justice  523 solely to the territorial state,67 as well as the interest of the entire international community in ending impunity for crimes that ‘shock the conscience of humanity’ and that can pose unique threats to international peace and security.68 These justifications can extend equally to cases where private actors are involved in international crimes, as it pertains to public ones. Indeed, since its earliest applications following the Second World War, it was clear that international criminal law extended duties to private as well as public actors, including those acting in a business context. At Nuremberg, a number of German industrialists were prosecuted for using their business enterprises as instrumentalities through which to commit or assist in international crimes for profit, such as using slave labour, plundering the industries of occupied territories and providing the equipment needed to exterminate human beings at an industrial scale.69 Concern about the role of industry in helping the German state commit aggressive war was at one point so much at the forefront of the minds of some Allied prosecutors that a second trial before the Allied International Military Tribunal that focused exclusively on economic actors was contemplated.70 There are also examples of prosecutions of individual business officials in contemporary international criminal practice. For example, the Netherlands has prosecuted two of its nationals for war crimes committed in overseas conflicts. Dutch businessman Frans van Anraat was sentenced to 16 and a half years imprisonment under the Dutch criminal justice system, for war crimes related to his deliveries of thiodoglycol to the Iraqi regime of Saddam Hussein. The chemicals were used in the manufacture of mustard gas and deployed against the Kurdish people in northern Iraq during the war against Iran in the 1980s, a fact known to van Anraat.71 In 2017, a Dutch Appeal Court resolved a protracted prosecution of Dutch national Guus Kouwenhoven for international crimes during the Second Liberian War. Kouwenhoven was 67 Antonio Cassese, ‘The Role of Internationalized Courts and Tribunals in the Fight Against International Criminality’ in Cesare Romano and others (eds), Internationalized Criminal Courts: Sierra Leone, East Timor, Kosovo, and Cambodia (OUP 2004) 4–6. See also Martin-Joe Ezeudu, ‘Revisiting Corporate Violations of Human Rights in Nigeria’s Niger Delta Region: Canvassing the Potential Role of the International Criminal Court’ (2011) 11 African Human Rights Law Journal 23, 48–49 (noting that this is true whether the offender is a natural or legal person). 68 See, for example, Rome Statute (n 1) Preamble. 69 United States v Flick [22 December 1947] in 6 Trials of War Criminals before the Nuernberg Military Tribunals under Control Council Law No 10 [1952] (hereinafter TWC); United States v Krauch [28 December 1948] in 7 and 8 TWC; United States v Krupp [31 July 1948] in 9 TWC; Trial of Bruno Tesch and two others (The Zyklon B Case) [1946] in United Nations War Crimes Commission, 1 Law Reports of Trials of War Criminals [1947] 93; The Roechling Case [30 June 1948] in 14 TWC 1061 (Appendix B). 70 Jonathan Bush, ‘The Prehistory of Corporations and Conspiracy in International Criminal Law: What Nuremberg Really Said’ (2009) 109(5) Columbia Law Review 1094, 1112–13. For evolving views of Allied states on the proposal for a second trial, see Donald Bloxham, ‘“The Trial that Never Was”: Why There Was No Second International Trial of Major War Criminals at Nuremberg’ [2002] 87(285) History: The Journal of the Historical Association 41. 71 Van Anraat, Judgment [23 December 2005] Case No 09/751003-04, District Court of The Hague; Van Anraat, Judgment [9 May 2007] Case No 2200050906, Court of Appeal of The Hague; Van Anraat, Judgment, Case No 07/10742, Supreme Court of The Netherlands. Some of the judgments translated into English are available online at . For discussions of the case, see Harmen G van der Wilt, ‘Genocide, Complicity in Genocide and International v Domestic Jurisdiction: Reflections on the van Anraat Case’ (2006) 4 Journal of International Criminal Law 239; Harmen G van der Wilt, ‘Genocide v War Crimes in the Van Anraat Appeal’ (2008) 6 Journal of International Criminal Law 557.

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524  Research handbook on human rights and business found guilty of illegal trading in small arms to then President Charles Taylor, in contravention of UN and Dutch arms embargos, and as an accessory to war crimes committed by Taylor’s armed forces.72 In an example of the work of the International Criminal Tribunal for Rwanda, the prosecution of Alfred Musema related to his use of his influence and material capacities as the director of the Gisovu Tea Factory to assist and encourage his employees and the local community to commit violence during the 1994 Rwandan genocide.73 A number of features of the international criminal justice regime have been touted as key factors in the turn to international criminal justice as a part of the solution to business involvement in gross human rights violations.74 They include the unique and relatively advanced nature of the enforcement regime for international crimes, relative at least to other human rights, together with the fact that the duty bearer is a non-state actor (the individual). As van den Herik and Černič note, the paradigm shift needed to expand the gaze of international criminal law to include not only individual business officers but also the corporate entity itself, as simply another type of non-state actor, appears somewhat less dramatic than trying to equate the corporation to a state.75 Moreover, the concise nature of international crimes assists in their application to a non-state actor.76 The relative acceptance by states that international crimes entitle the use of broader jurisdictional grounds under international law to entertain extraterritorial cases is also a strength of the system in the business and human rights context.77 As Augenstein has demonstrated, a significant point of intersection between public law (the human rights regime directed at states) and private law (tort litigation directed against the private offender) in the context of corporate human rights enforcement has been the mutual reinforcement under both systems of a territorialised conception of human rights; both operate on a presumption that victims and perpetrators of human rights abuses are located in the same state.78 The result is that, with few exceptions, transnational tort litigations must overcome this deep conceptual barrier which serves to protect state sovereignty and which manifests practically as legal principles that prevent victims from a third state seeking a remedy in the home state of a parent corporation linked to their harm.79 Hence, an enforcement system that explicitly justifies states (or international courts) adjudicating cases that occurred in the 72 Kouwenhoven, Judgment [7 June 2006] Case No AX7098, District Court of The Hague; Kouwenhoven, Judgment [10 March 2008] Case No 220043306, Court of Appeal of The Hague; Kouwenhoven, Judgment [20 April 2010] Case No 08/01322. For an outline of the final decision of the Dutch Appeal Court, on 21 April 2017, see Dieneke De Vos, ‘Corporate Accountability: Dutch Court Convicts Former “Timber Baron” of War Crimes in Liberia’ (INTLAWGRRLS, 24 April 2017) accessed 10 December 2017. Some of the judgments translated into English are available online at . 73 Prosecutor v Musema, Judgement and Sentence [27 January 2000] ICTR-96-13-A; Prosecutor v Musema, Judgement [16 November 2001] ICTR-96-13-A. For a critique of the extended notion of command responsibility adopted by the Tribunal in the case, see Alexander Zahar, ‘Command Responsibility of Civilian Superiors for Genocide’ (2001) 14 Leiden Journal of International Law 591. 74 Larissa van den Herik and Jernej Letnar Černič, ‘Regulating Corporations under International Law’ (2010) 8 Journal of International Criminal Justice 725, 739–42. 75 ibid 740–41. 76 ibid 741. 77 ibid 740. 78 Daniel Augenstein, ‘Torture as Tort? Transnational Tort Litigation for Corporate-Related Human Rights Violations and the Human Right to a Remedy’’ (2018) 18 (3) Human Rights Law Review 593. 79 ibid. Augenstein discusses also potential ways in which some of these limits might be overcome.

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The opportunities and challenges of international criminal justice  525 territory of another state, as is the case under the jurisdictional rules attaching to international crimes, presents real value. Indeed, given the cross-pollination of public and private law that Augenstein notes, those public international norms of jurisdiction might justify the stretching of private tort law rules to allow more permissive conditions for transnational tort litigations related to human rights abuses that also constitute international crimes.80 The limits of an enforcement system that leaves the pursuit of business-related human rights abuses solely to the territorial state where the harm occurred are well known, particularly where the harms involve transnational corporations, are committed in conflict zones or occur in contexts where the territorial state is dependent upon foreign direct investment.81 Indeed, in such cases there are potentially dual overlapping sources of impunity: those related to targeting a transnational corporate actor whose investment is valuable to the territorial state and those that inhere to international crimes. The ability to extend the existing resources and specialisations of extant international criminal courts and tribunals is also an advantage and is consistent with the ‘all roads to remedy’ approach to victim remedy noted above. Another related advantage of the international criminal justice enforcement model particular to the ICC is the catalysing effect of the ICC’s positive complementarity regime upon states in addressing international crimes domestically.82 Many states introduced laws relating to international crimes into their domestic criminal justice systems as part of their ratification of the Rome Statute, in some cases extending the application of those laws to business enterprises and empowering local courts to hear extraterritorial cases.83 The impetus for states to actually apply those laws to international crimes in business contexts would be strengthened if the ICC were to engage with a case of that nature itself.84 Moreover, the notion of positive complementarity, which involves the Court positively assisting states in capacity building around international crimes, could help build domestic resources towards offences by private actors if the ICC itself better developed its capacities in that regard. To date, the ICC has not pursued any cases involving business actors involved in international crimes. However, in 2016 the ICC Office of the Prosecutor (OTP) issued a Policy Paper on Case Selection and Prioritization (the Policy Paper), which indicated its intent to ‘give particular consideration to prosecuting Rome Statute crimes that are committed by means of, or that result in, inter alia, the destruction of the environment, the illegal exploitation of natural resources or the illegal dispossession of land’.85 This language has led some to argue that the OTP may be turning in a direction which is likely to bring the human rights impact of

An existing example is the US Alien Tort Statute, which allows victims to pursue a private (tort) remedy for breaches of the law of nations: 28 USC §1350. 81 Surya Deva, ‘The Sangam of Foreign Investment, Multinational Corporations and Human Rights: An Indian Perspective for a Developing Asia’ [2004] Singapore Journal of Legal Studies 305. 82 Joanna Kyriakakis, ‘Prosecuting Corporations for International Crimes: The Role for Domestic Criminal Law’ in Larry May and Zach Hoskins (eds), International Criminal Law and Philosophy (CUP 2010). 83 Anita Ramasastry and Robert C Thomas, Commerce, Crime and Conflict: Legal Remedies for Private Sector Liability for Grave Breaches of International Law (FAFO Institute of Applied International Studies 2006). 84 Kyriakakis (n 82) 137. 85 ICC Office of the Prosecutor, ‘Policy Paper on Case Selection and Prioritisation’ (15 September 2016) 41. 80

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526  Research handbook on human rights and business business into the spotlight.86 As Bernaz has argued, the expectation that the 2016 Policy Paper signals a genuine willingness within the OTP to consider credible cases of business-related international crime holds some weight. First, the relevant language of the OTP’s Policy Paper has not appeared in its official policies before and refers to criminal conduct likely to implicate corporate activity.87 For example, the mention of illegal dispossession of land has been linked to victim-led communications to the OTP around a decade-long system of land-grabbing by the ruling elite in Cambodia involving government actors and business leaders.88 Second, the Policy Paper may in itself encourage an increase in victim-led communications to the OTP in respect of international crimes committed in business settings.89 As Bernaz notes, this may have positive implications for the business and human rights project, not only in terms of bringing credible cases to the attention of the OTP. Irrespective of whether or how far actual ICC prosecutions proceed, the communications may of themselves garner public attention and inflict reputational damage on implicated businesses and business officials.90 Bernaz reports that at least one commercial law firm has already warned businesses about the risks of engaging in conduct described in the Policy Paper.91 Fair labelling is also important in evaluating the appropriate role to be played by international criminal law as a component of the victim right to an effective remedy in cases of business involvement in egregious human rights abuses. Fair labelling is a way of evaluating the legitimacy of criminal law and refers to avoiding certain types of unfairness that can manifest in a justice system where the law describes an offender’s conduct inaccurately and thus unfairly. From a victim-centric perspective, unfairness might manifest as against the victim when the way in which the offender is labelled understates the moral weight of the harm that the victim has suffered.92 This type of argument was raised by victims of business-related human rights abuses in the context of US litigation under the Alien Tort Statute in the case of Kiobel v Royal Dutch Petroleum.93 It was argued that being forced to resort to ordinary state tort law to pursue corporations for what were ostensibly international crimes would be an inadequate substitute for vindicating their rights, given that the label of the wrong (as a garden variety tort) would grossly understate the precise harms suffered by victims.94 A similar concern undergirds expectations noted in Section I that the criminal law, or its functional equivalent, should be used by states to pursue egregious corporate-related human rights abuses. In other words, the labelling of corporations and business officials involved in 86 Nadia Bernaz, ‘An Analysis of the ICC Office of the Prosecutor’s Policy Paper on Case Selection and Prioritization from the Perspective of Business and Human Rights’ (2017) 15 Journal of International Criminal Justice 527, 528–29. 87 ibid 533. 88 ibid 533–34. 89 ibid 534–35. 90 ibid 538–39. 91 ibid 538. 92 For a discussion of fair labelling, including its victim fairness component, see: Victor Tadros, ‘Fair Labelling and Social Solidarity’ in Lucia Zedner and Julian V Roberts (eds), Principles and Values in Criminal Law and Criminal Justice: Essays in Honour of Andrew Ashworth (OUP 2012) 67–80; James Chalmers and Fiona Leverick, ‘Fair Labelling in Criminal Law’ (2008) 71(2) Melbourne Law Review 217–46. 93 133 S Ct 1659 (2013). 94 ‘Brief of Amici Curiae Dr. Juan Romagoza Arce, Cecilia Santos Moran, and Ken Wiwa in Support of Petitioners’, Submission in Kiobel v Royal Dutch Petroleum [21 December 2011] No 10-1491, 17–19.

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The opportunities and challenges of international criminal justice  527 egregious breaches of human rights in a manner that adequately reflects the severity of the wrong and their involvement therein matters if we take a victim-centric approach to effective remedies. This is not to say that private (tort) law solutions should not form a part of efforts to remedy corporate human rights abuses. Rather it is to argue that a robust set of remedies would include a genuine place for the criminal law, even if it is to operate, for example, at the pinnacle of a sanctions pyramid – rarely used but available as the threat of full punishment in appropriate circumstances, to articulate the values at play. In addition to the points noted above, there are other qualities of international criminal law that speak in its favour as a crucial mechanism (among others) to be deployed by states to achieve effective victim redress.95 These include the lack of limitation periods that attach to international crimes;96 the capacity of the state to carry the weight of investigations, including the cost of a failed prosecution (thus addressing the power imbalance that can exist between corporations and affected communities and the risk of cost orders under civil litigation as barriers to victim access to remedy);97 and the enforcement model of international criminal justice being explicitly designed to reflect the risks of political interventions corrupting prosecutions of offenders of international crimes. While there may thus be good bases for the business and human rights project to target international and domestic agencies and institutions engaged with international criminal law, there are also many challenges and limitations to the field’s utility as a vehicle to pursue victim redress for business-related human rights abuses. First, where the law exists to enable the pursuit of business officials or corporations for international crimes, the extent to which victims have control over whether that occurs depends substantially upon the relevant legal system, thus potentially leaving the matter to the confidence and will of the relevant criminal justice agencies. Domestic justice agencies have been demonstrably hesitant to explore the potential of criminal law in corporate human rights abuse cases for reasons that include the complexity of pursuing corporate cases and a lack of resources and knowhow.98 There is also the substantial burden of proof in criminal cases, which demands certainty of guilt beyond reasonable doubt. In civil contexts, it has been argued that a reverse burden of proof in respect of corporate fault might in some contexts be appropriate to overcome barriers to victims in accessing remedies.99 In the context of pursuing business actors for international crimes, softening fault requirements (including to expand fault to include corporate negligence) is harder

For a detailed discussion of the advantages of international criminal law relative to civil litigation as a vehicle for corporate accountability for serious corporate human rights violation, see James Stewart, ‘The Turn to Corporate Criminal Liability for International Crimes: Transcending the Alien Tort Statute’ (2014) 47 NYU J International Law & Policy 121. 96 International Commission of Jurists, Report of the International Commission of Jurists Expert Legal Panel on Corporate Complicity in International Crimes, (ICJ 2008) vol 2, 54–55. 97 Confirming that the cost implications of civil proceedings can serve as a barrier to victim redress in business and human rights cases, see Skinner, McCorquodale and De Shutter (n 24) 18, 19–20 and 61–73. 98 ibid, 15–16 and 47–52. 99 ‘Leigh Day Submission to the Joint Committee on Human Rights Inquiry on Business and Human Rights’ (31 August 2016) 2 This recommendation to states has also been included in the Zero Draft Treaty, (n 46) Article 10(4). 95

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528  Research handbook on human rights and business to justify, both for reasons of fair labelling (from the defendant perspective) and to preserve the integrity of the international criminal justice system.100 This last point also links to the demanding elements of crimes and of modes of liability that attach to international crimes, which can make the evidential burden difficult for prosecutors to meet in business cases. This is particularly so where the impugned corporate conduct intersects with otherwise apparently legitimate commercial behaviours (such as selling goods or providing loans that may be used for lawful purposes – so-called neutral contributions) or where the business’ involvement is remote from the commission of the crime (such as supply chain relationships). For example, aiding and abetting as a mode of participating in an international crime includes a factual causative element – that the offender’s conduct in fact effectively assisted at some stage of the commission of the crime.101 In business cases involving contributions of funds or neutral commodities that are routinely available from multiple sources, this causative link raises a difficult inquiry as to whether the corporate actor in fact contributed to the specific crimes with which they are being charged, as opposed to providing resources put to some other lawful use by an otherwise criminal actor.102 Again, these high thresholds can be defended on the basis of fair labelling and the integrity of the system, but can constitute very real challenges in the corporate case. This is to say nothing about the challenges of corporate form in any litigation or prosecution that pursues a parent corporation for harms committed through the corporate group. Notwithstanding these challenges, there is evidence that there is a growing will to engage international criminal law to address corporate wrongdoing in appropriate cases. In addition to the OTP Policy Paper noted above, it is noteworthy that the design of a proposed African Criminal Court includes it having jurisdiction to hear cases against corporations for a wide range of international and transnational crimes.103 As noted earlier, in the context of the International Law Commission’s work on the drafting of a Convention on Crimes Against Humanity, article 6(8) encourages states to provide for the liability of legal persons within their domestic laws, albeit allowing the character of such liability to reflect the legal principles of the state.104 At the domestic level there are stirrings within criminal justice agencies towards corporate prosecutions for international crimes, though none have proceeded to a determination of merits. For example, the Australian Federal Police was reported to have considered prosecuting the Australian headquartered company Anvil Mining for its part assisting local military forces in the Democratic Republic of the Congo in a three day spree of violence against locals following threats to the company’s operations. The investigation was dropped, it is believed on the basis of deferring to local Congolese courts that were considering the case.105 O’Connor reports that

OHCHR Remedy Report Addendum (n 30) 15. See, for example, Prosecutor v Taylor, Appeal Judgment, SCSL-03-01-A (26 September 2013) [367]–[368]. 102 Farrell (n 53) 893. 103 African Union, ‘Protocol on Amendments to the Protocol on the Statute of the African Court of Justice and Human Rights’ (27 June 2014) Assembly/AU/Dec 529(XXIII) (Annex: Statute of the African Court of Justice and Human and People’s Rights), Article 28A (international criminal jurisdiction of the Court) and 46C (corporate criminal liability). 104 ILC, note 60. 105 Adam McBeth, ‘Crushed by Anvil: A Case Study on Responsibility for Human Rights in the Extractive Sector’ (2008) 11 Yale Human Rights Law Journal 127. 100 101

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The opportunities and challenges of international criminal justice  529 in 2006 Norwegian prosecutors considered whether a Norwegian-based parent corporation may have been criminally complicit in torture through the provision by its local subsidiary of electricity to detention facilities at Guantanamo Bay. In this instance, the conclusion was that there was insufficient evidence to demonstrate the requisite relationship between the parent company and its subsidiary to proceed.106 In 2015, Swiss investigators looked into the purported role of Argor-Heraeus, one of the world’s leading gold refining companies, in the pillaging of natural resources from the DRC through its supply chain. Swiss prosecutors determined that there was no case to answer after reasoning that the evidence did not demonstrate that the company’s role in enabling the gold to be sold on the international market met the conditions of commission of, or complicity in, pillage as a war crime.107 In 2011, civil society groups representing victims filed a criminal complaint against the French company Amesys in France for complicity by the company in torture committed by the Gaddafi regime. They allege that the company provided computer software to the Libyan government that was used for surveillance and mass interception of internet communications, thus facilitating abuses. While the Paris prosecutor’s office initially announced it would not open an investigation into the case, judicial intervention has meant the case has been referred to a specialised section of the Paris courts dealing in crimes against humanity, genocide and war crimes.108 The fact that in the majority of these cases prosecution was not deemed viable or further pursued is indicative of the challenges of extraterritorial corporate prosecutions, as well as possible confusion regarding the parameters of international criminal law.109 It may warrant a pessimistic view as to the prospects of corporate prosecutions for international crimes. At the same time, the attention given by these national criminal justice agencies may signal growing interest and confidence in addressing corporate nationals involved in international crimes abroad. It may thus be simply a matter of time before the right political conditions and factual scenario coalesce to deliver proceedings of this kind to the merits stage.

4.

THE GROWING VALUATION OF THE VICTIM IN INTERNATIONAL CRIMINAL LAW AND ITS POTENTIAL TO PROVIDE EFFECTIVE VICTIM REMEDY

Unlike earlier international criminal tribunals and courts, contemporary international criminal courts and tribunals are increasingly tasked with a victim-centric approach to both their processes and their outcomes. For example, the mechanics for victim participation, recognition and redress within the ICC reflect an ambitious attempt to realise the rights of victims in the context of international criminal trials. The Rome Statutes set up victim rights to participate in various stages of ICC proceedings, to share their views and to seek reparations through the Simon O’Connor, ‘Corporations, International Crimes and National Courts: A Norwegian View’ (2012) 94 IRRC 1007, 1012. 107 An English translation of the decision and discussion of the reasoning is available at James G Stewart, ‘The Argor Heraeus Decision on Corporate Pillage of Gold’ (19 October 2015) accessed 10 December 2017. 108 Skinner, McCorquodale and De Shutter (n 24) 49. 109 For example, for a critique of the prosecutor’s reasoning in the Argor Heraeus cases, see Stewart (n 107). 106

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530  Research handbook on human rights and business Court, including through the Court’s Trust Fund for Victims (TFV).110 The Trust Fund for Victims is responsible for establishing assistance programmes for victims in communities where the Office of the Prosecutor is actively investigating international crimes, and for administering reparation orders made by the Court. Examples of the former have involved the provision (through partner organisations) of reconstructive surgery services, trauma counselling and vocational training, to name a few.111 The Extraordinary Chambers in the Courts of Cambodia (ECCC) is another example of a particularly innovative international criminal court in respect of victim interests. This hybrid national/international court was established to deal with the historical crimes of the Khmer Rouge and was the first to grant victims the role of civil parties within those proceedings. This status grants victims (collectively through legal representatives) a direct and active voice in the trial. The ECCC is also developing unique practices around the implementation of collective and moral reparations, examples of which are provided below.112 This trajectory in international criminal justice increases the field’s potential to achieve effective victim remedies as described in Section I above, including the notion of providing victims with a ‘bouquet of remedies’. For example, while the ICC is still clarifying its strategies in relation to victim interests,113 there have been two judicial determinations that set out the broad principles that should govern reparation processes.114 The principles adopted by the Court reflect qualities highlighted by the UN Working Group for Business and Human Rights as to what should constitute a victim-centric approach to remedies. They include: ●● that the Court shall be mindful of victim dignity, humanity and human rights when deciding on reparations; ●● that the Court shall implement adequate measures to ensure the safety of victims participating in reparative processes; ●● that reparations shall be granted to victims without discrimination based on gender, age, race or other recognised grounds and should avoid replicating any discriminatory practices or structures that predated the crimes; ●● that there should be special attention to marginalised groups, such as women and children, in reparative measures; ●● that reparations should come in a variety of forms, including restitution, compensation, rehabilitation and other modalities with symbolic, preventive or transformative objectives; and

Rome Statute (n 1) Articles 68(3), 75 and 79. Trust Fund for Victims, ‘Assistance Programs’ (Trust Fund for Victims) accessed 24 February 2019. 112 Rachel Hughes and Maria Elander, ‘Justice and the Past: The Khmer Rouge Tribunal’ in Simon Springer and Katherine Brickell (eds), The Handbook of Contemporary Cambodia (Routledge 2016) 42–52; Silke Studzinsky, ‘Participation Rights of Victims as Civil Parties and the Challenges of their Implementation before the Extraordinary Chambers in the Courts of Cambodia’ in Thorsten Bonacker and Christoph Safferling (eds), Victims of International Crimes: An Interdisciplinary Discourse (Asser Press 2013). 113 Gaelle Carayon and Jonathan O’Donohue, ‘The International Criminal Court’s Strategies in Relation to Victims’ (2017) 15 Journal of International Criminal Justice 567. 114 Prosecutor v Lubanga, Decision establishing the principles and procedures to be applied to reparations [7 August 2012] ICC-01/04-01/06-2904; Prosecutor v Katanga, Order for Reparations Pursuant to Article 75 [24 March 2017] ICC-01/04-01/07-3728. 110 111

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The opportunities and challenges of international criminal justice  531 ●● that reparations should be appropriate, adequate and prompt, reflecting the harm suffered by the victim as adjudicated by the Court.115 While these principles are sound, their implementation following an accused’s verdict of guilt has proven extremely challenging and has led to disputes among agencies of the Court as to how they are to be achieved. For example, there has been tension between the TFV and judicial chambers regarding the right ways in which to achieve the broad goals of reparation in complex cases involving limited resources and huge numbers of affected persons.116 Nonetheless, the TFV have begun to implement the symbolic and collective reparation measures ordered in the Lubanga case and related to that accused’s guilt for the use of child soldiers. Those measures include programmes directed at educating and sensitising the affected communities to the harms experienced by child soldiers and their needs; and the provision of medical services and socio-economic development programmes to help child soldiers reintegrate into their communities.117 Moreover, in addition to supporting the implementation of any reparations ordered by the ICC following the conviction of an accused, the TFV has a separate mandate, unconnected to a particular trial, to implement projects of assistance to victim communities in the broader situations being investigated by the OTP where crimes are alleged to have occurred.118 The TFV has been most active under this assistant mandate, with Carayon and O’Donohue reporting in 2017: To date, over 30 assistance projects have been implemented in the Democratic Republic of Congo and Uganda, including counselling, reconstructive surgery, vocational training, microcredit and programmes aimed at confronting stigma faced by survivors of sexual violence. The TFV estimates that, in 2016, over 100,000 victims benefited directly from projects and an additional 350,000 benefited indirectly through improved well-being and reduced stigma.119

In the case of the ECCC, Hughes and Elander note that the restorative justice goals of the Court have been realised in a number of ways. These include, the sustained effort by the Court to engage in effective outreach with the Cambodian people; the creation of a detailed historical record of the relevant period of Cambodian history, which was otherwise at risk of being misremembered or forgotten, and specific efforts to disseminate that history through school materials and teacher training; and through innovative forms of moral and collective reparations.120 In terms of the latter, in Case 001, reparations included the naming of confirmed victims and a compilation of statements of apology by the accused. Case 002 was more innovative and involved greater victim participation in the design of reparations. Ordered reparations include a national day of remembrance, memorials and education centres, funding to publish the Court’s full judgment in Khmer, and funding to enable third parties to provide

Lubanga (n 114) 64–85. Luke Moffett, ‘Reparations for Victims at the International Criminal Court: A New Way Forward?’ (2017) 21(9) International Journal of Human Rights 1204, 1207–09. 117 ibid, 1208. 118 Katharine Peschke, ‘The Role and Mandates of the ICC Trust Fund for Victims’ in Thorsten Bonacker and Christoph Safferling (eds), Victims of International Crimes: An Interdisciplinary Discourse (Asser Press 2013) 321–23. 119 Carayon and O’Donohue (n 113) 583 (footnotes omitted). 120 Hughes and Elander (n 112) 47. 115 116

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532  Research handbook on human rights and business cross-cultural testimonial therapy for victims and to develop self-help groups.121 A great deal of this was achieved through the cooperation of agencies of the ECCC with local and international civil society groups.122 The potential for a growth in networks of civil society engaging with the same cases and situations under investigation by an international criminal court can also be part of the remedial value an international criminal prosecution can bring to victim communities. All of this is not to underplay the many critiques that have been directed at the success of international criminal courts thus far in meeting the expectations of victims for fair, prompt and effective remedies, nor the many challenges such courts face in achieving their ambitious goals. Funding limitations is always a core challenge in achieving effective victim redress when victim communities encompass large numbers of affected individuals and collectives. It is also noteworthy that there are now moves, both at the ICC and the ECCC, to begin to rein in and curtail victim rights as those courts mature. This suggests that there is a clear tension emerging in their achieving the requisite balance between the competing qualities of a fair trial and ambitious victim redress goals.123 In itself, the tying of victim remedies to a criminal trial has its disadvantages, given the need to link a right to repair with the defendant’s specific offences.124 Moffett also notes the various tensions that exist for the ICC’s TFV between its reparative and assistance-directed mandates, and the problems, from a victim perspective, that might follow from a blurring of the divide between those two bases for victim repair.125 Looking at the potential of the international criminal justice system to achieve effective victim remedies in the business and human rights context more broadly, it must be noted that, apart from the international courts with explicit reparative objectives, only in some, but certainly not all, jurisdictions do victims have the capacity to attach a civil recovery to a criminal prosecution or to play any significant part in determinations regarding criminal proceedings. Moreover, many jurisdictions still limit corporate criminal penalties to fines payable to the state, and perhaps some restitution to victims, rather than broader forms of material and symbolic repair to the victim community.126 Having said this, the shift to a victim-centric approach in contemporary international criminal justice is still in its infancy. While expectations around what international criminal justice can deliver by way of remedies for victims are likely to be refined and perhaps reduced, it is unlikely that we will see a resort to earlier frameworks where the role and interests of victims were largely symbolic. Proposals for reforms of the system, such as improving the relationship between the work of international criminal courts and the role for states in victim reparation for international crimes (positive reparative complementarity) and the idea of creating a separate reparations chamber within the ICC,127 may pave the way to an increasingly effective and efficient reparations system within international criminal law. Such a maturation within the system will only increase the potential role international criminal justice could play in the broader business and human rights project, in order that the shared goals of both fields

123 124 125 126 127 121 122

ibid 49. ibid 47–49. ibid 48; Carayon and O’Donohue (n 113) 570. Moffett (n 116) 1206–07. ibid 1209. Skinner, McCorquodale and De Shutter (n 24) 46–51. Moffett (n 116) 1214–17.

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The opportunities and challenges of international criminal justice  533 to address the needs of victims of international crimes are met, irrespective of whether those crimes were perpetrated for reasons of ideology or for reasons of profit.

5. CONCLUSION International criminal law will only ever be a small component in the broader context of securing access to effective remedies for victims of business-related human rights abuses; however, its role may be a crucial and irreplaceable one. International crimes are unique in the spectrum of human rights abuses and this is reflected in the special measures states have adopted and endorsed in order to fight impunity for such crimes. Those measures lend themselves to the goal of overcoming the ordinary limits on access to judicial justice mechanisms that victims of business-related human rights abuses continue to experience, but bring with them new challenges deriving from the particularly high thresholds for offender guilt to be established. Within the field, there is a growing recognition of the need for international criminal law to play a role in cases where private commercial actors motivated by the pursuit of profit engage in, or participate in, international crimes in order to achieve that goal. Moreover, the discernible move towards a more victim-oriented approach within the work of international criminal courts brings with it new possibilities as to the field’s ability to provide effective remedies for victims, albeit that here too unique challenges remain. Nonetheless, states are compelled by their obligations under the Guiding Principles to explore all possible ways in which to begin to overcome the clear failures to date in achieving the goals of Pillar III. The role of international criminal justice should be part of that matrix.

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Index

Aarhus Convention 413 Abbott, KW 83–4 AboveGround 484, 485, 486 access to information see disclosure access to justice 11, 29, 138, 210, 348–9, 421, 450, 461 international investment 291, 294, 299–300, 312, 313 MDBs 318, 321, 333 Rio Declaration (1997) 318 access to remedy 11, 19–20, 29, 40, 63, 158, 191, 461, 494 children 376–7 cost orders 527 indigenous peoples 348–52 information, role of 403–21 information deficit 419–21 international human rights law 411–18 UNGPs 405–11 international criminal justice: victim redress 513–33 non-judicial grievance mechanisms 299, 471–91, 516 appropriateness of 478–81 definition 472 empirical studies: outcomes 486–90 ILO freedom of association procedure 476 independent accountability mechanisms 328–9, 330, 333, 473–4, 475, 479, 480, 488, 489 mapping 472–7 National Contact Points 26, 437, 471–2, 474, 475, 476, 478–81, 483, 484, 486–8, 489, 504, 506–7 national human rights institutions 474, 475, 479, 489, 497–507 operational-level grievance mechanisms 474, 475 performance measurement 482–5, 491 regional human rights commissions 473, 475 state-owned enterprises 242–3 UN Basic Principles 348–9, 379, 478, 515–16, 519 ActionAid 434 Adidas 142, 430 Africa 277, 373, 415, 528 see also individual countries

African Charter on Human and Peoples’ Rights 214, 412, 416 African Charter on the Rights and Welfare of the Child 357 African Commission on Human and Peoples’ Rights 416, 417, 475, 476–7 jurisdiction 212, 213, 214 African Development Bank (AfDB) 251, 316, 327 Agenda 21 248 aggression 513 agriculture 257, 277, 285, 373, 395, 396, 399, 429, 430 OECD Guidelines 110, 128 aiding and abetting 57, 520, 528 AIDS/HIV 277 Alfredsson, G 336 Alien Tort Statute (ATS) 3, 46–62, 351 corporate-defendant litigation 50–51, 55–8, 61–2 legacy of ATS 59–61 damages/compensation 46, 51, 59 history 47–8 jurisprudence 46–7, 48 Filártiga v Peña-Irala 46–7, 49–50, 53, 54 Jesner v Arab Bank 31–2, 57–8 Kiobel v Royal Dutch Petroleum Co 31, 55–6, 58, 200, 380, 526 Sosa v Alvarez-Machaín 52–3, 56 post-Sosa cases: government officials and corporate defendants 53–4 powerful defendants 50–52 US Supreme Court 31–2, 46, 47, 48, 50, 52–3, 200, 351, 380, 526 guts ATS 55–8 Alston, Philip 436 Altholz, R 484, 488 American Bar Association 82 American Convention on Human Rights 212, 214, 219, 294, 357–8, 412, 414–15, 417 American Law Institute (ALI) 208, 209 amicus curiae 300, 307, 308, 431 Amnesty International 73, 424, 434, 438, 484, 486 Business Group in UK 27 Anaya, James 337, 341–2 Annan, Kofi 28, 71, 72, 433 Anner, M 141 Antunes, JE 463 apparel/garment sector 124, 128, 263, 264, 373, 431

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Index  535 Cambodia 135, 137, 138, 139, 148 CHRB 117, 128, 429, 430 Clean Clothes Campaign (CCC) 141 decent work see Bangladesh Dutch Agreement on Sustainable Garment and Textile 110 fast fashion 127 OECD Guidelines 110, 128 power, commitment and leverage 125–6 arbitration 477 investor–state 68, 291, 292–3, 295–6, 297–8, 299–300, 302, 306–9, 310–311 Argentina 105–6, 305, 307, 328–9, 388, 434, 488 truth commission and prosecutions 391–2, 399 artificial intelligence 12, 20 Asian Development Bank (ADB) 251, 316, 327–8 Asian Infrastructure Investment Bank (AIIB) 317 assembly, freedom of 93, 152 association, freedom of 123, 124, 137–9, 141, 152, 157, 163, 476 Association for the Taxation of Financial Transactions and Aid to Citizens (ATTAC) 436–7 auditing 110, 133, 155–6, 169, 195 social see separate entry Augenstein, D 524, 525 Australia 20, 237, 454, 486–7, 528 jurisdiction 205, 207, 218 Modern Slavery Act 101, 111, 187–8, 196, 205, 408, 435 automation 20 Avery, C 27 Azarova, V 387 Azerbaijan 475 Backer, LC 69 Baidu 73 Bainbridge, SM 452–3, 469 Banerjee, B 37 Bangladesh 130–150 Accord on Fire and Building Safety in 142–3, 144–5 Alliance for Bangladesh Worker Safety 142, 143, 144 Better Work 142, 144 BGMEA 139, 141, 145 Clean Clothes Campaign (CCC) 141 decent work 149–50 ensuring 142–9 labour rights see below tenets of 131–2 global supply chain framework 132–3 ILO 143–4 Labour Act 2006 138, 145 labour rights 134, 149

association, freedom of 137–9 safety at work 139–41 wage equity 134–7 market labour control regime 141 Multifabs Ltd 144, 145–6 new governance approach 147–9, 150 Rana Plaza 120, 135, 139, 140, 142, 146, 425 Tazreen 120–121, 139–40, 142 Wal-Mart 121, 132, 134, 139–40, 142 banks 81, 84, 102, 110, 387, 437 multilateral development (MDBs) see separate entry Barrick Gold 151, 369, 374 Baumann-Pauly, D 428 Baxi, U 27 Belgium 207 Belt and Road Initiative 234, 237 benchmarking 102, 114–15, 117, 119, 128, 429–31 Berle, AA, Jr 462 Berle–Dodd debate 2, 224 Bernaz, N 526 best practices 37, 72, 106, 109, 120, 305, 433 Bhopal gas disaster 3, 26–7, 408, 425 Bickford, L 422 biotechnology 20 BlackRock 7–8 Blumberg, PI 462 Bolivia 345 Bowen, HR 33 Brazil 8, 66, 73, 197, 236, 237, 305, 388, 391, 430 Bretton Woods 66–7 British Petroleum 475 Brodie, M 505 Bromley, P 36–7 Buhmann, K 78 Burbano, VC 36 burden of proof 403, 420, 421, 527 Burma 46, 380 Bush, George W 52–3, 54, 56 business and human rights 1, 3–5, 10–14 1970–1995: precursors 24–7 1995–2011: formative years 27–30 2011–ongoing: maturing 30–32 CSR and 1, 23–4, 26, 28, 29, 32–45 business and human rights treaty 8, 19, 44, 199, 205, 243, 313, 381, 400, 493 access to courts 61 burden of proof 421 children’s rights 377 criminal law 519–21 indigenous peoples 344–5 information, access to 421 jurisdiction 205, 443

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536  Research handbook on human rights and business OEIGWG 4, 30–31, 199, 272–3, 344–5, 377, 519–21 role for NHRIs in potential 507–11 trade agreements 272–4, 280, 287–8 Treaty Alliance 434, 438, 439 Business & Human Rights Resource Centre (BHRRC) 366, 437 business case 2–3, 5, 10, 13, 37–8 business of human rights 1, 5–10 business or human rights 1, 2–3 Business Roundtable 8 Cáceres, Berta 424, 441–2 Cambodia 325, 329–30, 503–4, 526 Extraordinary Chambers in the Courts of (ECCC) 530, 531–2 readymade garment industry 135, 137, 138, 139, 148 Cameroon 325 Canada 106, 291, 335, 350, 369, 478, 486 CETA 304 company law 454 CSR 164–5, 173 HRIAs 157, 284 human rights defenders 444 jurisdiction 207, 208, 212, 213 Nevsun case 155–6, 169, 173 Pacific E&P case 155, 156–8 SLAPPs 442 tort law 173, 455, 456 capitalism 37, 38, 65, 66, 391 Carayon, G 531 Carroll, AB 33 CarrotMob 438 Carter, Jimmy 49 Center for Human Rights & Environment (CEDHA, Argentina) 434 Centre for Research on Multinational Corporations (SOMO) 437 Černič, JL 524 certification 102, 195, 433 Chad 328 Chamán, Adolf Ich 335 Chevron 151, 299–300, 351, 437 Chigovera, A 346–7 children’s rights 20, 171, 339, 354–78 access to remedy: child victims 376–7 best interests of the child 356, 371 business toolkit 367–9 child labour 6, 31, 34, 36, 54, 94, 97, 100, 102, 105, 113, 134, 145, 164, 253, 262, 357, 358, 359, 360, 361, 363, 364, 365, 368, 372–3, 378, 426, 428, 430, 432, 458 child soldiers 373, 531

Children’s Rights and Business Principles (CRBP) 366–7, 368, 370–371, 376, 377 climate change 375–6 conflict-affected areas 369, 373–4 Convention on the Rights of the Child (CRC) 262, 355–7, 358, 359, 360–361, 363, 367, 372, 373, 376, 377 General Comment No 16 205, 210–211, 362, 363, 369–72 individual complaints mechanism 376 jurisdiction 205, 210–211, 216–17, 220, 221 digital technologies and online 374–5 migrant 445 National Action Plans 362–4 overview 355–8 security-related human rights abuses 369, 373–4 soft law BHR instruments 364–5 UN Working Group on Business and Human Rights 361, 362, 364, 377 views of child 356, 371 World Conference on Human Rights and the Vienna Declaration 362 Chile 53, 305 Chilton, A 192, 193 China 51, 66, 73, 81–2, 111, 135, 441, 443 Belt and Road Initiative 234, 237 Development Bank 73 extractive industries 82, 165 state-owned enterprises 233–4, 235, 237 UNGPs 76 China Minmetals 73 China Mobile 73 Chiquita 28 civil society 3, 5, 63, 73, 76, 78, 99, 177, 199, 406 criminal law 529, 532 decent work 148 definition 423 evolution of role of 424–7 human rights due diligence 110, 111, 119 knowing and showing 426 naming and shaming 177, 187, 425–6, 436 organizations (CSOs) 3, 6, 11–12, 13, 29, 30, 422–3, 426–7, 445 benchmarking 429–31 business role in protecting 443–5 children’s rights 360, 362, 365–6, 367, 368, 373, 375 collaboration with corporations 433–4 CSR 44 definition 423 disclosure 183, 196 due diligence 110, 113 global coordination and movements 439

Surya Deva and David Birchall - 9781786436405

Index  537 international standard-setting 434–5 investor–state arbitration 307 labour movements 432–3 legal assistance 431–2 multi-stakeholder initiatives 428, 432, 433 national laws 435 problems faced by 440–443 regulatory role 427–9 reputational risk and consumer activism 438 shareholder activism 435–6, 443 thinktanks, research and advocacy 437–8 trade agreements 284 watchdog activism 436–7 parent company obligations 465–6 see also non-governmental organizations (NGOs) Clean Clothes Campaign (CCC) 141 climate change 12, 21, 36, 68, 74, 85, 106 children’s rights 375–6 extractive industries 171–3 jurisdiction, protective 204 Paris Agreement 85, 375, 445 Coca-Cola 68–9 Code of Conduct on Transnational Corporations 3, 19, 26 collective bargaining 123, 124, 137, 138, 141, 164 Colombia 156–8, 304–5, 306, 345 land restitution 396–7, 398, 399 colonialism 235, 339 comity, international 57, 107, 203 company law 12–13, 469–70 limited liability 69, 447–8 parent company liability 69, 418, 446–8, 458, 460 group as moving target 450–451 reasons claimants turn to parent 448–50 reforms proposals 461–9 tort law and company law 456–7 types of corporate groups 451 piercing of corporate veil 447, 452–4, 455, 457 separate legal personality 69, 199, 446, 447–8 competition law 457 complex environments see transitional justice Compliance Advisor Ombudsman (CAO) see International Finance Corporation (IFC) conciliation 477, 501 conflict minerals 31, 32, 81, 101–2, 104, 178, 179–81, 407 OECD Guidelines 110, 161, 164, 165 Switzerland 113 conflict-affected areas children’s rights 369, 373–4 transitional justice see separate entry

Congo, Democratic Republic of 161, 164, 178–81, 330, 365, 393, 407, 471, 479, 488, 528, 529, 531 consent: free, prior and informed 157, 341–2, 347–8, 352, 418, 502 consultation 12, 299, 302, 326–7, 502 indigenous peoples 301, 326, 341–2, 347, 416 consumer(s) 14, 142, 177, 183–4, 190–191, 193, 196, 406, 410 activism 438 CORE Coalition 431, 435 corporate governance 74, 162, 368, 422 limited liability 468 state-owned enterprises: OECD Guidelines on 229, 233, 257 Corporate Human Rights Benchmark (CHRB) 114–15, 117, 128, 429–30 corporate influence 6–7, 373–4 corporate responsibility to respect human rights 29, 75–7, 459 activity-based 97–9 business partners 260 children’s rights 359–61, 366–7 complex environments 379–81, 382, 385–6, 387, 393, 398–9, 400, 401 definitions 89 human rights due diligence 88–90, 96–9, 105 indigenous peoples 343 information 405–6, 407, 408–9, 410–411 national human rights institutions 497, 499 OECD Guidelines 80 public procurement 260–261, 266 SDGs 9 state-owned enterprises 225, 231, 239–40, 241–2, 243–4 corporate social responsibility (CSR) 3, 70, 81, 146, 164–5, 173 concepts 32–3, 38–9 cooptation 44, 45 critiques 35–40, 70, 146 history 33–4, 70 investment treaties 305 political 33, 34 private-public dichotomy 38–9 public procurement 253 relationship with BHR 1, 23–4, 26, 28, 29, 32–5 BHR as critique of CSR 35–40 CSR as hindrance to BHR 40–43 possible future scenarios 43–5 replacement 44–5 reporting 111, 410–411 sphere of influence 98 trade agreements 283

Surya Deva and David Birchall - 9781786436405

538  Research handbook on human rights and business voluntary/mandatory distinction 34–5, 39, 40, 42–3, 44 corruption 82, 110, 178, 182, 193, 236–7, 238, 250, 251, 305 anti- 72, 91, 102, 103, 190, 247, 364 Bangladesh 133, 140, 148, 149 cost allocation 14 cost–benefit analysis 14 Costco 121 Council of Europe 241, 461, 479, 522 access to information 407, 409, 413, 418, 419 jurisdiction 211, 220–221 crimes against humanity 51, 60, 156, 203, 339, 389, 513, 521, 528 criminal law 102, 103, 105–6, 136, 145, 443 international see separate entry Daes, E-IA 338–9 Daniel, C 484, 488, 489 Danish Institute for Human Rights 111, 155, 165–6, 167, 362, 368 data protection 206–7 Davis, K 33 Davis, R 168–9 de las Casas, Bartolomé 339–40 De Schutter, O 285, 293, 465 de Zayas, Alfred-Maurice 301–2 Dearborn, M 463 decoupling 36–7 Deegan, C 145 defamation 442 Dell 263 Delmas, M 36 Deng Xiaoping 233 Denmark 111, 478–9 Deva, S 349, 498 development finance institutions (DFIs) 473–4 multilateral development banks (MDBs) see separate entry development model 12 D’Hollander, D 248 digital technologies children’s rights 374–5 social media 20, 374, 442 direct action and protest 135, 439 disabilities, persons with 171, 360, 362, 507 disclosure 13, 14, 101, 103, 111–12, 176–97, 466 access to effective remedy: role of information 403–21 mandatory social disclosure 407–9, 411, 419, 420 Australia: Modern Slavery Act 101, 111, 187–8, 196, 205, 408, 435 effectiveness of laws 190–193

European Union: non-financial reporting 32, 81, 101, 104, 112, 190, 196, 408 France 111, 177 Duty of Vigilance Law 31, 100, 188–9, 195, 196, 203, 408 Netherlands 100, 403 state’s duty to protect 191, 194–7 United Kingdom 111, 177 Modern Slavery Act 31, 101, 111, 112, 185–7, 192–3, 196, 263, 408, 435 United States 177, 178–85, 192, 196, 408 California Transparency in Supply Chains Act 111, 183–5, 408 Dodd–Frank Act 31, 101–2, 104, 178–82, 187, 193, 407 see also information disincentives 13–14, 282, 283–4 distributed networks 80–84 divide and rule policy 12 Donaldson, T 25, 27 Duty of Vigilance Law see France Earth Rights International 431, 474 East Timor 388, 396, 399 Easterbrook, FH 463 Ecuador 30, 151, 299–300, 344, 345, 351, 372 education, right to 375 El Salvador 53 Elander, M 531 employment 278 decent work 259 ILO 130–131, 143–4, 260 in readymade garments supply industry see Bangladesh enforced/forced disappearances 156, 220, 221, 391, 508 environment 68, 351, 408, 425, 433, 434, 454, 505 activists 423 Bangladesh 133 children’s rights 375–6, 378 climate change see separate entry environmental impact assessments 103, 154, 167, 290–291, 321 social and 162, 305, 323, 346, 416–17 environmental law 375 and parent company liability 457–8, 464 European Union 101, 190 extractive industries 69, 154, 158, 159, 167, 169–70, 171–3, 174 Pacific E&P case 156–7 France 100, 112 human rights due diligence 110, 112 IFC 159 international crime 525–6 investment regime 290–291, 298, 305, 306

Surya Deva and David Birchall - 9781786436405

Index  539 jurisdiction 214–15 protective 204 non-financial reporting 190 Norway 102 public procurement 102, 248, 250, 251, 252, 253, 262 trade agreements 287 United States 78, 102, 408, 458 equality of arms 404, 420 Equator Principles 167 Eritrea 155–6 ethical investment 436 ethical standards and brands 438 Ethical Trading Initiative (ETI) 111, 119, 124, 489 ethics, business 34, 38 Ethiopia 237, 330–331 European Centre for Constitutional and Human Rights (ECCHR) 431 European Convention on Human Rights (ECHR) 212, 308, 412, 522 European Court of Human Rights (ECtHR) 281, 308, 413 corporation: agent of state 254 jurisdiction 213 private delivery of public services 258 European Investment Bank (EIB) 316, 324 European Union 32, 100, 454, 466 Bangladeshi garments 141 CETA 304 conflict minerals 31, 32, 81, 101–2, 407 corporate social responsibility (CSR) 38–9, 81 Court of Justice of 206–7, 252 criminal law 522 data protection: GRDP 206–7 four freedoms 251 fundamental rights 285 Agency for 209, 461, 522 Charter of 206, 358 Generalized System of Preferences 141 GSP+ clauses 283 Global Human Rights Sanctions regime 206 human rights defenders 444 jurisdiction 206–7, 208–9, 219–20 multilateral investment court 302 National Contact Points 479 non-financial reporting 32, 81, 101, 104, 112, 190, 196, 408 public procurement 247, 249, 251–3, 260, 262, 266 state-owned enterprises 233, 240 trade agreements 277, 284, 285, 304 export credit 14, 419 agencies 102, 154, 157, 240 expression, freedom of 57–8, 93, 180, 207, 411–15

extractive industries 81, 151–74, 257, 290–291, 347, 350, 395, 417 benchmarking 429, 430 children 164, 171, 372, 373 climate change 151, 171–3 community development agreements 169 companies 166 Nevsun Resources Ltd 155–6, 169, 173 Pacific Exploration & Production Ltd 155, 156–8 Shell 28, 69–70, 105, 151, 165–6, 200, 403–4, 405, 420, 431–2, 444 conflict minerals see separate entry CSR 41–2, 70, 164–5, 173 home and host states 164–5 human rights violations 152–8 International Council on Mining and Metals 162–3, 165, 170–171, 351–2 IPIECA 163–4, 166 jurisdiction 213 limitations of current practices 166 business-centric 166–7 climate change 171–3 environmental rights 169–70 gender equality 170–171 timing of HRDD and avoidance of harm 168–9 National Contact Points 479–80, 487–8, 489 operational-level grievance mechanisms 475 US: SEC’s Resource Extraction Payment Rule 178, 179, 181–2 extradition 203, 220, 515 extrajudicial killing 60, 209, 380, 396 Extraordinary Chambers in the Courts of Cambodia (ECCC) 530, 531–2 extraterritoriality 31, 43, 56, 58, 256, 313, 493, 529 Asian NHRIs and home country control 502–5 jurisdiction 195, 197, 255, 443, 517, 524, 525 extraterritorial vs transnational 200 obligatory transnational 211–22 permissive transnational 201–10 recommended transnational 210–211 Exxon Mobil Corporation 54, 56 Facebook 374 Fair Food Code of Conduct 474 Fair Labor Association (FLA) 119, 121, 425, 428 fair trade labels 252 movement 438 fair trial 209, 307, 404, 413, 532 Fair Wear Foundation 119, 428 fast fashion 127 FIFA 82–3 finance

Surya Deva and David Birchall - 9781786436405

540  Research handbook on human rights and business CEDAW 172, 216, 218–19 extractive industries: gender equality 170–171 indigenous peoples 339 UN Working Group on Business and Human Rights 361, 362 general principles of law 198, 208, 209–10, 221–2, 318 Generalized System of Preferences 141 GSP+ clauses 283 genocide 59, 203, 216, 339, 513, 524 Germany 100, 165 company law 454 jurisdiction 207, 208, 213, 218 Nuremberg trials 379, 384, 388, 389–90, 392–3, 398, 399, 523 Ghana 325–6, 328 global governance 25, 26, 34, 84–5 Bretton Woods 66–7 embedded liberalism 65–6, 71, 433 environmental governance 85 global public domain 75–6 legitimacy 78–9 networked governance 67–8, 80–84 protectionism 65–6, 249, 433 reflexive law 77–8 smart mix regulation 8, 43, 103, 512 social norms 75–7 Global Reporting Initiative (GRI) 99, 114, 115–16, 119, 128, 364–5, 368 Google 68–9, 206–7, 374 Graf, A 386 Greenpeace 438 greenwashing 36, 429, 433 group companies see parent company liability for subsidiary Grover, Anand 301 Guantanamo Bay 212, 529 Guatemala 299, 335, 345, 347, 388, 391

ATTAC 436–7 banks see separate entry extractive industries 153–4 money laundering 103 Fink, Larry 7 Finland 100 Finnemore, M 84 Firger, D 193 Fischel, DR 463 Fleming, P 38 food 215 right to 171, 277, 375, 387 security 371 football 82–3 forced labour 6, 46, 97, 101, 121, 152, 155, 164, 184, 185, 197, 263, 339, 389–90, 392–3, 399, 428, 430, 432 forced/enforced disappearances 156, 220, 221, 391, 508 Ford 105–6, 391–2, 399 foreign aid and human rights 442 foreign direct investment 94, 153, 502, 525 forum necessitatis 210 forum non conveniens 49, 50, 57, 211 Foxconn 425 fragmentation, legal and institutional 67–8 framing, multiperspectival 74–5 France 103, 106, 207, 217 criminal law 529 Duty of Vigilance Law 31, 81, 100, 112–13, 188–9, 195, 196, 203, 408, 458, 460, 466 National Contact Point 365 Franks, D 168–9 Frederick, WC 33 free riding 469 free speech 57–8, 95, 180, 207, 411–15 free trade agreements (FTAs) see trade agreements Friedman, M 2, 3, 35 Friends of the Earth 403, 439 G7 260, 479 G20 109, 110 Gandhi Talisman 11 Ganson, B 484 Garcia, Tomas 442 garment industry see apparel/garment sector GATS (General Agreement on Trade in Services) 282 GATT (General Agreement on Tariffs and Trade) 281–2, 284 gender 16, 20, 160, 171, 179–80, 267, 330, 360 anti-slavery legislation 20 Bangladesh 134, 136, 139, 144

Haiti 53 Hall, Andy 442 Hansmann, H 463, 466–7 health 215, 295, 298 right to 152, 277, 301, 355, 371, 375, 376, 411, 416 and safety 93, 103, 123, 124, 127, 142, 262, 306, 417, 430, 456, 501 boilers 146 IFC: EHS Guidelines 159 MDBs 321 safety at work: Bangladesh 139–41, 142–3, 144–5 Heede, R 172 Hendry, J 349

Surya Deva and David Birchall - 9781786436405

Index  541 Hess, D 407 Heyes, A 434 HIV/AIDS 277 Honduras 325, 443, 443–4 housing/shelter 171, 375, 386–7 Hughes, R 531 Human Rights Commission 61, 63, 70–71, 73–4 Human Rights Committee indigenous peoples 341, 349–50 individual communications 349–50 jurisdiction 212–13, 214, 219 privately operated prison 258 Human Rights Council 74, 170 BHR treaty 30, 44, 381 children 359, 369, 375, 376 endorsement of UNGPs 4, 29, 61, 63, 64, 79, 81, 88, 154, 493 Israeli settlements 387 Open-ended Intergovernmental Working Group (OEIGWG) 4, 272 trade and investment agreements 271, 284, 301–2 UN Working Group on Business and Human Rights 80, 343 human rights defenders 11–12, 237, 335, 423–4, 431, 432, 440–3, 445 business role in protecting 443–5 Cáceres, Berta 424, 441–2 definition 423 investment regime 299 Sulyandziga, Pavel 440–441 US Global Magnitsky Act 205 human rights due diligence 4, 8, 11, 75, 77, 78, 88, 90–92, 211, 379, 459 benchmarking 102, 430 children 94, 97, 100, 102, 105, 371, 372 complex environments: gross violations of IHRL and IHL 380, 382–4, 386, 399 concept of due diligence 109–13 critique 103–6 dilemmas 93–5, 99 European Union 101–2, 407 extractive industries 151–74 human rights violations and 152–8 implementation of HRDD 158–66 limitations of current practices 166–73 four-step process 76 France 103, 460 Duty of Vigilance Law 31, 81, 100, 112–13, 188–9, 203, 408, 458, 460, 466 human rights impact assessments (HRIAs) see separate entry human rights risks 92–3, 97, 101, 109, 112, 121, 159, 188, 189

information 93, 95, 409–11 knowing and showing 426 leverage 94–5, 96–7, 98, 102, 125–6 linkages 96–9, 104, 107 national human rights institutions (NHRIs) 502, 504, 509–10, 511 Netherlands 100, 103, 110, 113, 460 OECD Due Diligence Guidance see separate entry practice 114–18 public procurement 14, 102, 253, 255, 266 regulation 99–103, 107 risk(s) human rights 92–3, 97, 101, 109, 112, 121, 159, 188, 189 social 92–3, 103–4 social auditing see separate entry survey: detection of adverse impacts on human rights 41 Switzerland 100, 113, 203, 435 referendum 43, 113 United States 102 conflict minerals 101–2, 104, 407 human rights impact assessments (HRIAs) 73, 116, 119, 301, 331 children 374 disclosure 405, 418, 419 extractive industries 154–5, 166, 167 IFC 158–9 Nevsun case 155–6, 169, 173 Pacific E&P case 157 indigenous peoples 418 minimum conditions 286 Switzerland 41 trade agreements 270, 271–3, 282, 284–6, 287–8 investment and 293, 310, 312 Human Rights Watch 424, 438 human trafficking 121, 164, 187, 188, 189, 192, 253 see also modern under slavery identity, right to an 375 Iff, A 386 immunity 50, 53–4 impact assessments 12, 93, 322, 368 children’s rights in 368 environmental 103, 154, 167, 290–291, 321 and social 162, 305, 323, 346, 416–17 human rights see separate entry social 154, 167, 327–8 incentives 13–14, 101, 102, 103, 282, 283–4 India 60, 66, 73, 111, 135, 489 Asian Development Bank 327–8 Bhopal gas disaster 3, 26–7, 408, 425 data protection 207

Surya Deva and David Birchall - 9781786436405

542  Research handbook on human rights and business EU–India FTA 277 indigenous peoples 351 state-owned enterprises 235 indigenous peoples 20, 170, 171–2, 335–53, 360, 362, 433 access to remedies 348–52 Basic Principles and Guidelines 348–9 Awas Tingni Community v Nicaragua 336 consent 157, 341–2, 347–8, 352, 418, 502 Declaration on the Rights of Indigenous Peoples 336, 341, 342, 344 direct action 439 Endorois people 417 environmental and social impact assessments 346, 416–17 historical context 338–40 human rights defenders 335, 440–42 ICCPR 340–341, 349–50 IFC 160 information, access to 413–18 international investment law 290–291, 294, 295, 301 international level 337–8, 339, 340–342, 348 regional systems 345–6 towards treaty on BHR 344–5 UNGPs 342–4, 346, 348, 351, 417 ITUC 141 Kaliña and Lokono peoples 346, 413–15, 417 Maasai people 324, 326 MDBs 321, 324, 326 national legal systems 346–8, 352, 353 Colombia 347 Guatemala 347 Namibia 346–7 Paraguay 346 Ogoni people 25, 69, 105, 380, 416 Saami people 350–351 Saramaka people 417 Indonesia 66, 135, 323–4, 396, 475 state-owned enterprises 237, 238 information 93, 95, 157, 318, 326, 333 access to effective remedy: role of 403–21 addressing deficit 419–21 consolidated reports 457 disclosure see separate entry internet 206–7 investment regime 302, 311 sharing 419, 509 trade agreements 274 Ingrams, M 488 Institute for Human Rights and Business (IHRB) 30, 82–3, 365–6, 438 intellectual property rights 277, 278, 285 Inter-American Commission on Human Rights 335, 345, 475

Inter-American Court of Human Rights 281, 336, 345–6, 412–15, 417 investment treaties 280, 294 jurisdiction 213, 214–16, 219 inter-generational equity 375 interdisciplinarity 30, 32, 288, 400 International Bar Association (IBA) 82 International Chamber of Commerce (ICC) 6–7 International Commission of Jurists (ICJ) 431, 437–8, 439 International Corporate Accountability Roundtable (ICAR) 438 International Court of Justice (ICJ) 212, 216, 217 Lotus 201–2, 207, 208 Nicaragua 254 International Covenant on Civil and Political Rights (ICCPR) 349 art 2(1): territory and jurisdiction 211, 212–13, 214 art 19: freedom of expression 412 art 25(a): participation 301–2 art 27: minorities 340–341 children 357, 373 General Comment No 23 341 General Comment No 33 350 Optional Protocol: right to individual communications 349–50 state and privately operated prison 258 International Covenant on Economic, Social and Cultural Rights (ICESCR) children 357 General Comment No 24 217–18, 293–4, 418, 419, 420, 493 jurisdiction 216, 217–18, 221 international criminal law 106, 201, 203, 207, 220–221, 380, 384, 388, 397–8 Extraordinary Chambers in the Courts of Cambodia (ECCC) 530, 531–2 fair labelling 526–7, 528 International Criminal Court 156, 522, 525, 529–31, 532 Office of the Prosecutor 525–6, 530, 531 Trust Fund for Victims 530, 531, 532 international criminal justice victim redress 513–33 OHCHR Accountability and Remedy Project 518 tribunals 384, 388, 397, 525 Nuremberg 379, 384, 388, 389–90, 392–3, 398, 399, 523 Rwanda 384, 524 UN Working Group on Business and Human Rights 530 report into access to remedy 517, 518, 519 international economic law 269, 274–5, 279

Surya Deva and David Birchall - 9781786436405

Index  543 see also trade agreements International Federation for Human Rights (FIDH) 439 International Finance Corporation (IFC) 60, 81, 158–60, 163, 167, 170, 323 Compliance Advisor Ombudsman (CAO) 316, 317, 323–4, 325, 480, 488 international humanitarian law 379, 433 international investment law 290–314, 352 investment treaties or FTAs with investment chapters 78, 292–300, 303–6, 309–10, 311–12 bilateral 68, 238, 280, 291, 294, 301–2, 304–5, 306 regional 305 investor–state arbitration 68, 291, 292–3, 295–6, 297–8, 299–300, 302, 306–9, 310–311 moving forward 309–13 regulatory chill 298 International Labour Organization (ILO) 3, 69, 82, 148, 260, 432 children 357, 359–60, 367, 372, 373 Committee on Freedom of Association 476 decent work in global supply chains 130–131, 260 Decent Work Country Programme (DWCP) in Bangladesh 143–4 Fundamental Principles and Rights at Work Bangladesh: project promoting 144 Declaration on 89, 131, 432 indigenous peoples 341, 344 jurisdiction 210 public procurement 247–8, 249, 262, 265 seafood industry 126–7 tripartite structure 7 international law 29, 30, 69, 70, 199, 283 customary 201, 203, 207–8, 217, 221, 227, 273, 318, 493, 520 general principles of law 198, 208, 209–10, 221–2, 318 jus cogens 227, 279 stagnation 67 systemic integration 295–6 UN Charter: art 103 279, 280 International Law Association (ILA) 342 International Law Commission (ILC) crimes against humanity 521, 528 Draft Articles on State Responsibility 254 International Network for Economic, Social and Cultural Rights (ESCR-net) 439 International Olympic Committee (IOC) 83 International Organisation of Employers (IOE) 8 International Organization for Standardization (ISO) 80–81, 99, 248, 261

International Trade Union Confederation (ITUC) 141 internet 95, 200, 206–7, 374–5 Iraq 56, 523 Ireland 217 Islam, MA 145 Israel 53, 212, 386–7, 438 iura novit curia 414 Japan 66, 102, 207 Jochnick, C 422 Jones, MT 38 jurisdiction 105–6, 184, 191, 198–222, 403 active personality/nationality 202–3, 204–5, 208, 222 adjudicatory 201, 207–10 by necessity 209–10 effects 203–4, 213–16 extraterritorial 195, 197, 255–6, 443, 517, 524, 525 transnational vs 200 general principles of law 198, 208, 209–10, 221–2 international crimes/criminal courts 201, 203, 207, 220–1, 514 Maastricht Principles 208, 221–2 obligatory transnational 211–22 European Union 219–20 general principles of law and Maastricht Principles 221–2 human rights treaties 211–19 universal jurisdiction treaties 220–221 passive personality 204, 206 permissive transnational 201–10 adjudicatory 201, 207–10 enforcement 201 regulatory/prescriptive 201–7 protective 204 regulatory/prescriptive 201–7 active personality/nationality 202–3, 204–5, 208, 222 effects 203–4 passive personality 204, 206 protective 204 territorial 202, 204, 205, 222 universal 203, 204, 205–6 territorial 202, 204, 205, 222 transnational extraterritorial vs 200 obligatory 211–22 permissive 201–10 recommended 210–211 treaties, human rights 211–19 treaties with universal 220–221

Surya Deva and David Birchall - 9781786436405

544  Research handbook on human rights and business universal 198, 201, 203, 204, 205–6, 208–9, 220–221, 515 jus cogens 227, 279 Karadžić, Radovan 50, 51 Kell, G 71 Kenya 217, 324, 326, 417, 505–6 Keohane, RO 68 KnowtheChain 184, 185 Knox, JH 69 Korczak, Janusz 354, 355, 378 Kozma, J 463 Kraakman, R 463, 466–7 Kratochwil, F 85 labour unions see trade unions Labowitz, S 192 land 82 -grabbing 503, 526 indigenous peoples 290, 294, 336–7, 338–9, 341, 342, 346, 349, 351 restitution in Colombia 396–7, 398, 399 rights and direct action 439 Laos 504 League of Nations 355 legal aid 405, 419 legitimacy, process 78–9 Leigh Day 431–2 Lenovo 73 lex mercatoria 68 liberalism, embedded 65–6, 71, 433 Liberia 388, 523–4 Libya 529 life, right to 152, 171, 213–14, 215, 356, 371, 375, 413 limitation periods 50, 59–60, 346, 431, 527 Lin, L W 133 litigation 28, 105–6, 176, 524, 525 against CSOs and HRDs 442 Alien Tort Statute (ATS) see separate entry Awas Tingni Community v Nicaragua 336 Barber v Nestlé USA, Inc 185 Chandler v Cape 455–6 Choc v Hudbay Minerals 173, 335, 353, 456 class actions 50, 51, 419 Claude Reyes v Chile 412–13 cost orders 527 due diligence 103 Endorois v Kenya 417 Evropaïki Dynamiki v European Environment Agency 252 Kaliña and Lokono peoples v Suriname 346, 413–15, 417 legal assistance 431–2 Lotus 201–2, 207, 208

Netherlands: disclosure 403–4, 405, 420 Nevsun v Araya 19–20 Nicaragua v United States 254 public interest 419 Saramaka People v Suriname 417 Sawhoyamaxa Indigenous Community v Paraguay 280, 294 strategic lawsuit against public participation (SLAPP) 442 Vedanta v Lungowe 19–20, 105, 431 Locke, RM 123, 148, 466 Lopez, C 520 Mackie, C 461 Mahin, Virginia 197 Malaysia 504 Marcos, Ferdinand 50 Mares, R 409 Marx, A 248 Mbeki, Thabo 396 mediation 476, 477, 501 Mendelson, N 463 MERCOSUR Investment Protocol 305 Mexico 218, 345, 500–502 Michalowski, S 390, 393 Microsoft 6, 374 migrant children 445 migrant workers 82 Miller, M 190 Miller-Dawkins, M 483, 484, 485, 489 Millon, D 463 minorities 340–341, 360, 362 Moazzem, KG 136 modern slavery see modern under slavery Moffett, L 532 moral hazard 449, 461, 463 Morocco 285, 305, 306 Muchlinski, PT 451, 463, 464 multi-disciplinarity 44 Multilateral Agreement on Investment (MAI) 434–5 multilateral development banks (MDBs) 315–33, 474 independent accountability mechanisms (IAMs) 315–17, 320, 322–33, 473–4, 475, 479, 480, 488, 489 obligations and responsibilities 317–22 see also individual banks multinational enterprises 3, 4, 25, 26–7, 33, 66–7, 70, 98, 200 arbitration 477 empirical studies 40–42 parent company liability for subsidiary see separate entry scale mismatches 68–9 see also individual enterprises

Surya Deva and David Birchall - 9781786436405

Index  545 multistakeholderism 8–9, 28, 79, 99, 114, 133, 161 multi-stakeholder initiatives (MSIs) 95, 110, 119, 120, 126, 128, 374, 428, 432, 433, 465, 474, 489 mutual legal assistance 465, 509 Myanmar 81, 102 Namibia 346–7 Narine, M 190–191 National Action Plans (NAPs) 31, 42–3, 81, 101, 344, 420–421, 448, 459–60, 465, 396 children’s rights 362–4, 372 indigenous peoples 344 United Kingdom 363–4, 372, 444 National Contact Points (NCPs) 26, 437, 471–2, 474, 475, 476, 478–81 children’s rights 365, 376 indigenous peoples 350–351 NHRIs and 504, 506–7 performance measurement 483, 484, 486–8, 489 national development banks 474 national human rights institutions (NHRIs) 474, 475, 479, 489, 492–512 advisory role 496–7 business and human rights treaty: relationship with 507–11 children 364, 376 Global Alliance of 506, 507, 511 monitoring role 495–6, 502 non-judicial remedy 497–500 enhance role 506–7 regional experiences 500–506 regional experiences 500 Asian NHRIs and home country control 502–5 Kenya 505–6 Mexico 500–502 UN Guiding Principles on Business and Human Rights 493–500, 501, 502, 504, 507, 508 nationalism 433 negligence 60, 189, 420, 454, 455, 456, 527 Nemtsov, Boris 440 neo-colonialism 356 neoliberalism 29, 35, 38, 66, 289, 436 Nestlé 121 Netherlands 103, 460, 523–4 child labour 31, 100, 113, 458 evidence in civil procedures 403–4, 405, 420 human rights due diligence 100, 103, 110, 113, 460 jurisdiction 105, 207, 208, 218 National Contact Point 471, 479 networked governance 67–8, 80–84

Nevsun Resources Ltd 155–6, 169, 173 New Development Bank (NDB) 317 New Zealand 218 Nicaragua 480 Nigeria 24–5, 59, 69, 105, 151, 380, 403–4, 416, 420, 431–2, 444 Morocco–Nigeria BIT 305, 306 West African gas pipeline 325–6, 328 Nike 34, 66, 68–9, 70, 123–4, 425 Nolan, J 428 non-discrimination 164, 216, 274, 318, 356, 371, 387 CEDAW 216, 218–19 public procurement 247, 249, 250, 251 social auditing 123, 124 non-governmental organizations (NGOs) 7, 28, 41, 72, 73, 79, 83, 412, 423, 427, 428, 475, 487, 510 alliance building 439 brown and green 434 business and industry (BINGOs) 433–4 children’s rights 367 China: foreign 443 public procurement 262–3 quasi 415 seafood industry 126–7 social auditing 122 trade agreements 273 see also civil society non-judicial grievance mechanisms see under access to remedy Norway 100, 172, 304, 306, 344, 437 company law 454 criminal law 529 export credit agency 102 sovereign wealth fund 173–4 Novartis 68–9 Nowak, M 463 O’Connor, C 192 O’Connor, S 528–9 O’Donohue, J 531 OECD Due Diligence Guidance 110, 118–19, 129 for Meaningful Stakeholder Engagement in the Extractive Sector 160–161 for Responsible Business Conduct 111, 162 for Responsible Supply Chains in the Garment and Footwear Sector 110, 128 for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas 110, 161, 164, 165, 171 OECD Guidelines on Corporate Governance of State-Owned Enterprises 229, 230–231, 232–3, 236, 240, 241, 257

Surya Deva and David Birchall - 9781786436405

546  Research handbook on human rights and business OECD Guidelines for Multinational Enterprises 26, 76, 80, 110, 160, 162, 312 children 365, 373 corporate group: legal separation 459–60 disclosure 410 jurisdiction 210 leverage 126 National Contact Points (NCPs) 26, 350–351, 365, 376, 437, 471–2, 474, 475, 476, 478–81, 483, 484, 486–8, 489, 504, 506–7 public procurement 253 state-owned enterprises 228 OECD and public procurement 253, 257, 261, 266 Oestreich, AM 434 offshoring 66, 69 O’Kelly, C 426 Open-ended Intergovernmental Working Group (OEIGWG) see business and human rights treaty Organisation of African Unity 357 Organisation for Security and Cooperation in Europe (OSCE) 251 outsourcing 97, 466, 469 Oxfam 182 Australia 171 Behind the Brands 438 International 438 Pacific Exploration & Production Ltd 155, 156–8 Pakistan 120, 121, 135, 262, 431 Palazzo, G 32, 38 Palestinian Territories, occupied 212, 386–7 Panama 326 Paraguay 294, 328–9, 346 parent company liability for subsidiary 5, 69, 403–4, 446–70 company law 418, 446–8, 458, 460 and piercing corporate veil 452–4, 456–7 National Action Plans 460 other bodies of law 457–9 problems with legal separation 199, 448 group as moving target 450–451 reasons claimants turn to parent 448–50 reform proposals 461–9 reports on access to remedy 461 soft law instruments on social responsibility 459–60 tort law 448, 449, 453, 454, 458, 467 duty of care 173, 455–7 see also jurisdiction see also jurisdiction Paris Principles 492, 495–6, 497–8, 508 participation 12, 167, 413 children 356, 360

decent work 148 indigenous peoples 326, 416 investment regime 301–2, 311 MDBs 318, 321, 326–8, 333 strategic lawsuit against public (SLAPP) 442 Pasqualucci, JM 337 Paul, G 385, 387 Pauwelyn, J 67, 79 Peru 290–91, 328, 345 Petersmann, E-U 274 PetroChina 73 piracy 203 plants 250, 277, 282 Poland 363 Polanyi, K 65 polycentric governance 73–9, 427–8, 459, 465–6, 469, 470 see also global governance populism 433 poverty 73, 74, 171, 323, 436, 503 Powell, WW 36–7 principled pragmatism 4, 427 see also UN Guiding Principles on Business and Human Rights Principles for Responsible Investment 73 private life, right to 413 privatization 233–4, 258, 259, 276 process legitimacy 78–9 Procter & Gamble 121 product liability laws 457 profit maximization 2–3, 12, 13, 38, 92, 93, 232 property, right to 275, 307, 387, 417 Public Eye 437 public procurement 102, 245–67, 458 advancing human rights: examples 261–5 Agenda 21 248 aims, primary and secondary 247–9 Broad-Based Black Economic Empowerment (B-BBEE) 264–5 defining 246–7 Electronics Watch 264 European Union 247, 249, 251–3, 260, 262, 266 export-credits 419 human rights law and attribution 254 extraterritoriality 255–6 general principles 253–6 positive obligations 255 private delivery of public services 257–8, 259 state liability 256 state-owned enterprises 257, 259 ILO Labour Clauses (Public Contracts) Convention (No 94) 247–8, 249

Surya Deva and David Birchall - 9781786436405

Index  547 ILO Recommendation No 84 247–8 International Court of Justice 254 legal and policy frameworks 249–53 responsible business 258–61 social clauses 248 sustainable value chains 258–61 WTO Agreement on Government Procurement 247, 249–50, 253 Qatar 82 race discrimination 25, 216, 340, 417 race to the bottom 94, 248, 520 Rana, M 133 Reagan, Ronald 50, 66 reflexive dynamics 77–8 reputation 61, 69–70, 112, 193, 293, 297, 331, 438, 526 resource curse 179, 181 responsible business conduct (RBC) 1, 72, 88, 109, 261, 444 NHRIs and other social actors 503, 506 OECD Due Diligence Guidance 111, 162 Rhadebe, Sikhosiphi 424 rights and rightsholders 10–12, 291–2 NJGM driven by community or workers 474 risk(s) human rights 92–3, 97, 101, 109, 112, 121, 159, 188, 189 separation of entities and limited liability 447, 448–9, 459, 461, 463, 465, 467, 469–70 social 92–3, 103–4 environmental and 152, 158, 323, 325 Robinson, Mary 82–3 Rodríguez-Garavito, C 77 Romis, M 148 Room to Read 37 Ruggie, J 4, 25, 29, 34, 88, 90, 97–9, 342, 354, 359, 366, 382, 384–5, 392, 394, 395, 397, 405, 422, 427, 459, 464, 466 rule of law 57, 93, 225, 274, 331, 353, 449, 460, 465, 470 Russia 82, 440–441, 443 Rwanda 238, 384, 524 Santoro, MA 25 Sarfarty, G 192, 193 Saro-Wiwa, Ken 24–5, 27, 69, 380, 425 Sassen, S 66–7 Save the Children 362, 366, 368, 433 Scheinin, M 340–41, 463 Scheltema, M 484, 485 Schepers, DH 36 Scherer, AG 32, 38

Schönsteiner, J 385, 387 seafood industry 121, 126–7 self-determination 152, 171, 238 Sen, A 77 separate legal personality see company law Sethi, SP 36 Shah, J 133 shareholder activism 435–6, 443 primacy 2, 8, 12, 93, 449 Sheahan, F 376 Shell 28, 69–70, 105, 151, 200, 403–4, 405, 420, 431–2, 444 human rights due diligence 165–6 Shift 30, 81, 111, 434 Sierra Leone 388 Sikkink, K 84 Simkins, C 395 Singapore 234–5 Sinopec 68–9, 73 Sjåfjell, B 248 Skinner, G 464, 465 slavery 152, 156 jurisdiction 201, 203 jus cogens 279 modern 20, 201, 256 Australian Act 101, 111, 187–8, 196, 205, 408, 435 California Transparency in Supply Chains Act 111, 183–5, 408 UK Act 31, 81, 101, 111, 112, 185–7, 192–3, 196, 202, 205, 263, 408, 435 slave labour 192–3, 389–90, 392–3, 399, 523 small- and medium-sized businesses 92, 400, 401 small-scale farmers or retailers 251, 277 smart mix regulation 8, 43, 103, 512 Snidal, D 84 Social Accountability International (SAI) 119, 121 social auditing 108–9, 140, 148, 264 appropriate action 123–9 assessing and tracking: inherent limitations of 121–3 concept of due diligence 109–13 failure of 120–121 power, commitment and leverage 125–7 purchasing practices 127–9 resilience of 118–20 social constructivism 72 social licence 151, 291 social media 20, 374, 442 social norms 75–7 social security 278 Somalia 53, 356 South Africa 25, 27, 30, 66, 379–80, 388, 393, 424

Surya Deva and David Birchall - 9781786436405

548  Research handbook on human rights and business MDBs 327 public procurement 264–5 state-owned enterprises 235 Sullivan Principles 3, 25, 26, 435 Truth and Reconciliation Commission 384, 394–6, 397, 398, 399 US class action lawsuits 51 South Korea 66, 102, 218 South Sudan 356 sovereign immunity 50, 208, 223, 226–9, 231, 238, 239, 241, 242–3, 244 sovereign wealth funds 173–4, 234, 244 sovereignty, state 198, 203, 217, 231, 321, 329, 524 Spain 218, 339 Sri Lanka 135 standard of living, adequate 277 state-owned enterprises (SOEs) 151, 154, 223–44 China 233–4, 235, 237 definitions 226, 230–232, 257 issues and challenges 242–4 legal basis of 232–8 national human rights institutions 496, 505 public procurement 257, 259 sovereign immunity 223, 226–9, 231, 238, 239, 241, 242–3, 244 state’s duty to protect 194–6 UNGPs and 230, 231, 236, 239–44 Pillar I 239–41, 242, 243–4 Pillar II 239–40, 241–2, 243–4 Sternberg, E 2 strategic lawsuit against public participation (SLAPP) 442 subsidiarity 107 Sudan 105, 151 sugar 480, 503 Sullivan, C 484, 488 Sullivan Principles 3, 25, 26, 435 Sulyandziga, Pavel 440–441 supply chains 11, 34, 36, 67, 93, 105, 182, 426, 494 apparel/garment sector see separate entry automaker 501 benchmarking 430 conflict minerals 31, 32, 101–2, 104, 178, 179–81, 407 OECD guidelines 110, 161, 164, 165 criminal law 106, 528, 529 dilemmas 94–5 disclosure see separate entry France: Duty of Vigilance Law 31, 81, 100, 112–13, 188–9, 195, 196, 203, 408, 458, 466 GRI Standards 115–16 industry-wide initiatives 94, 126 labour rights and human rights 432 MDBs: IAMs 323–4

National Contact Points 475 national human rights institutions 501–2 Netherlands 100, 110, 113 in practice: due diligence reporting 114–18 pricing 97 public procurement 246, 249, 259, 260, 262–4, 265, 266 scheduling practices 97 social auditing see separate entry see also value chains Suriname 346, 413–15, 417 sustainable development 12, 170–171, 261, 318 2030 Agenda for 6, 261 Goals (SDGs) 5, 9–10, 147–8, 261, 267, 318 sustainable public procurement 248, 261, 266 Sweatfree Purchasing Consortium (SPC) 263, 264 Sweden 105, 262–3, 350–351, 437 Swiss Coalition of Corporate Justice (SCCJ) 435 Switzerland 8, 41, 42–3, 217, 460, 529 HRDD 43, 100, 113, 203, 435 Taiwan 66, 102 Tatum, ML 349 Tauli-Corpuz, Victoria 301 Taylor, Charles 524 terrorism 203, 433 Teubner, G 77 Texaco 151, 299–300 Thailand 121, 442, 503–4 Thatcher, Margaret 66 Thompson, B 484 Timor Leste 388, 396, 399 tort 106, 431, 524, 525, 526–7 parent liability for subsidiary 448, 449, 453, 454, 458, 464, 467 conspiracy 464 duty of care 173, 455–7 state-owned enterprises 238, 243 United States 59–60, 458 Alien Tort Statute (ATS) see separate entry torture 49, 56, 59, 60, 106, 156, 279, 318, 391, 396, 529 universal jurisdiction 203, 209, 220, 221 Toyota 68–9 trade agreements 78, 266, 269–89 conceptualising trade and human rights 274–5 ESCR Committee 271–2 as framework of business activities 278 FTAs with investment chapters see international investment law human rights clauses 272, 282–4, 288 human rights impact assessments 270, 271–3, 282, 284–6, 287–8

Surya Deva and David Birchall - 9781786436405

Index  549 international law: relationship between human rights and 278–82 conflicts and interpretation 281–2 exception clauses 281–2 formal primacy 279–80 proposals for reform 287–8 regulatory autonomy 275–6 social and economic effects 276–7 trade unions 7, 99, 106, 110, 119, 122, 391, 423, 432, 476 Bangladesh 133, 135, 136, 137–9, 140, 141, 142, 143, 148, 149 Cambodia 137 global federations 133, 141 right to join 123, 124, 157 Vietnam 137 Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement 277 Trans-Pacific Partnership 301, 306 transitional justice 379–401 Argentina 388, 391–2, 399 Colombia 396–7, 398, 399 complex environment, meaning of 379 findings of 380–381 Argentina: truth commission and prosecutions 391–2 benefiting from violations 392–7 Second World War cases 389–90, 392–3 international humanitarian law 379–80 lessons for business and human rights 397–400 Occupied Palestinian Territories 386–7 tribunals 384, 388, 397, 525 Nuremberg 379, 384, 388, 389–90, 392–3, 398, 399, 523 Rwanda 384, 524 UN Guiding Principles on Business and Human Rights 379–87, 393, 397–401 local and foreign companies 400, 401 UN Human Rights Council 381, 387 UN Office of the High Commissioner for Human Rights (OHCHR) 382, 383, 384, 387 Transnational Institute (TNI) 436, 439 transparency 13, 14, 40, 102, 106, 415, 419 benchmarking 430 disclosure see separate entry Global Compact 427 human rights impact assessments 286 investment regime 292, 300, 301, 311 parent companies 466 public procurement 250, 251, 264 social auditing 122 state duty to ensure 406–11 state-owned enterprises 232, 233, 237, 244

supply chains 111, 114, 129 UN Working Group on Business and Human Rights 106 Transparency International 73 Treaty Alliance 434, 438, 439 see also business and human rights treaty Trump, Donald 182, 445 truth commissions Argentina 391 East Timor 396 South Africa 384, 394–6, 397, 398, 399 Tutu, Desmond 394 Twitter 442 Uganda 237, 330, 531 UN Charter 217, 221, 279, 280, 317 UN Economic and Social Council 3 UN Global Compact 4, 6, 10, 19, 28–9, 70, 71–3, 74, 76, 133, 158, 165, 433 children’s rights 364, 366, 373 criticism 427 decoupling 36 NHRIs 506 social constructivist approach 72 sphere of influence 98 UN Guiding Principles on Business and Human Rights 4, 5, 6, 8, 11, 61 access to remedy see separate entry children’s rights 359–61, 368, 369, 372, 377, 378 complex environments: gross violations of IHRL and IHL 379–87, 393, 397–401 national businesses 400, 401 complicity in human rights abuses 384–5, 444 context fragmentation 67–8 geoeconomic/geopolitical 65–7 scale mismatches 68–9 corporate group: legal separation 459 corporate responsibility to respect human rights see separate entry CSR 29, 40–41, 43, 44 drafting 78–9, 434 environmental rights 169–70 gender 20 history 24–30 human rights due diligence 75, 77, 78, 88, 90–92, 99–107, 154, 168, 504 continuous obligation 169 dilemmas 93, 94 ex ante process 167 four-step process 76 information 409–11 knowing and showing 426 NHRIs 502, 504

Surya Deva and David Birchall - 9781786436405

550  Research handbook on human rights and business practice 116, 159, 162–3, 164, 165, 166 reporting framework 114, 116–17, 119 social auditing 118, 119, 123 supply chain 109 human rights risk 92 ILO Declaration on Fundamental Principles and Rights at Work 432 indigenous peoples 342–4, 346, 348, 351, 417 information, access to 405–11, 415, 417 investment regime 293, 312 jurisdiction 198, 199, 203, 210, 213, 216 leverage 94–5, 96–7, 98, 102, 125–6, 383, 398, 400 mainstreaming 502 MDBs 319, 333 multi-stakeholder initiatives 474 national human rights institutions 493–500, 501, 502, 504, 507, 508 norm cascading (Finnemore and Sikkink) 84 OECD guidelines 26 principled pragmatism 4, 427 Protect, Respect and Remedy Framework 30, 63, 75, 78, 79, 88, 154, 359, 405, 507 public procurement 245, 249, 253, 255, 259, 260 reporting framework 114, 116–17, 119 SDGs 9 social construction of 63–86 state duty to ensure transparency 406–11 to protect human rights 63, 74, 89, 100, 191, 194–7, 239–41, 242, 243–4, 245, 249, 259, 346, 493, 504, 517 state-owned enterprises 230, 231, 236, 239–44 trade agreements 271, 274, 276, 278 UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights 4, 28–9, 61, 64, 70–71, 90 sphere of influence 70, 98 UN Office of the High Commissioner for Human Rights (OHCHR) 83, 84 Accountability and Remedy Project 461, 518 children’s rights 360, 375 climate change 172 complex environments: gross violations of IHRL and IHL 382, 383, 384, 387 performance measurement of NJGMs 483–4 state-based non-judicial mechanisms 477, 479, 480 UN Security Council 156, 373, 374 UN Special Rapporteur on the Situation of Human Rights Defenders 423, 440

UN Working Group on Business and Human Rights 11, 30, 80, 81, 84, 495 access to remedy 461, 481, 488–9, 489, 517, 518, 519, 530 bouquet of remedies 11, 481, 519 children’s rights 361, 362, 364, 377 company law 12 gender dimensions 20 human rights defenders 440, 444 human rights due diligence 4, 106 indigenous peoples 343–4 relation with OEIGWG 345 SDGs 9 state-owned enterprises 231, 240–242, 257 UNCITRAL Model Law on Public Procurement 250–51 unfair competition 185 UNICEF (United Nations Children’s Fund) 358, 362–3, 364, 366–8, 369, 375, 377 United Kingdom 20, 66, 81, 103, 384, 451 Bribery Act 205 company law 12–13, 453 Criminal Finances Act 205 CSR 41–2 disclosure 111, 177 human rights due diligence 14, 112 jurisdiction 105, 202, 205, 207, 208, 217, 219, 220 Modern Slavery Act 31, 101, 111, 112, 185–7, 192–3, 196, 202, 205, 263, 408, 435 National Action Plan 363–4, 372, 444 National Contact Point 365, 486, 489 public sector contracts 14, 263 tort law 455 United Nations 26, 67 United States 28, 65–6, 106, 142, 384, 451 Alien Tort Statute (ATS) 3, 46–62 Anti-Terrorism Act 1994 59 Berta Cáceres Human Rights in Honduras Act 442 children’s rights 102, 356 class action lawsuits 50, 51 company law 452, 453, 454, 455 conflict minerals 31, 81, 101–2, 104, 178, 179–81, 407 disclosure 177, 178–85, 192, 196, 408 California Transparency in Supply Chains Act 111, 183–5, 408 Dodd–Frank Act 31, 101–2, 104, 178–82, 187, 193, 407 environmental and health hazards: disclosure 408 environmental law 458 Filártiga v Peña-Irala 46–7, 49–50, 53, 54

Surya Deva and David Birchall - 9781786436405

Index  551 Vietnam 66, 135, 137, 139, 504 Vogel, D 466 Voluntary Principles on Security and Human Rights 170, 369, 374 Vormedal, I 433–4 Votaw, D 33

Florida tomato industry 474 Foreign Legal Assistance Statute 431 free speech 57–8, 180 Guantanamo Bay 212, 529 International Emergency Economic Powers Act 102 jurisdiction 184, 208, 212, 219 Global Magnitsky Act 205, 206 migrant children 445 public procurement 263–4 regulating self-regulation 78 SLAPPs 442 social dumping 102 Supreme Court 46–7, 48, 50, 351, 458 Citizens United 57–8 Jesner v Arab Bank 31–2, 57–8 Kiobel v Royal Dutch Petroleum Co 31, 56, 58, 200, 380, 526 Sosa v Alvarez-Machaín 52–3, 56 tort 59–60, 458 Alien Tort Statute (ATS) see separate entry Torture Victim Protection Act 209 Trafficking Victim Protection Act 59 UNGPs 76 Universal Declaration of Human Rights (UDHR) 221, 318, 355, 411 unjust enrichment 464 Unocal 28, 46, 51, 54, 59, 380 Utting, P 439 Uzbekistan 365 value chains global (GVCs) 94, 98, 278, 451, 461, 466, 470 sustainable 258–61 see also supply chains van Baar, A 393 van den Herik, L 524 Vernon, R 66 vicarious liability 457, 458 Victor, D 68 Vienna Convention on the Law of Treaties 279, 281, 295

Waddock, S 424 Wal-Mart 121, 132, 134, 139–40, 142 war crimes 56, 59–60, 105, 386–7, 389–90, 392–3, 398, 513, 523, 529 watchdog activism 436–7 water 157, 215, 276 access to safe drinking 371 right to 171, 307, 375, 387 Weissbrodt, D 28 Wessel, RA 67, 79 Wettstein, F 444 whistleblowing 91, 205, 475 wicked problems 68 Wiesbrock, A 248 Wiessner, S 336 Wijen, F 37 Wilde-Ramsing, J 483, 485, 487–8 window dressing 36 Witting, CA 464 Worker Rights Consortium (WRC) 263–4 World Bank 168, 173, 174, 251, 324, 325, 330, 367 Inspection Panel 316, 317, 325–6, 328–31, 474 World Health Organization (WHO) 375 World Players Association (WPA) 83 World Trade Organization (WTO) 269, 277, 278–9, 288, 424–5 China’s entry 66 dispute settlement 281 public procurement 247, 249–50, 253 Worldwide Responsible Accredited Production (WRAP) 119, 121 Wouters, J 67, 79 Zimbabwe 237 Zornada, K 486–7 Zuma, Jacob 237

Surya Deva and David Birchall - 9781786436405

Surya Deva and David Birchall - 9781786436405