Editor’s note: Daniel Iglesias Márquez is an external researcher in Business and Human Rights at the Tarragona Centre for Environmental Law Studies. He holds a PhD from the Rovira Virgili University in Tarragona (Spain). Other main fields of interest include International Environmental Law, International Criminal Law and European law.

The EU and its Member States have largely endorsed the UN Guiding Principles on Business and Human Rights (UNGPs) in their Corporate Social Responsibility (CSR) strategy and have committed to supporting their implementation.[i] The UNGPs state that companies have a responsibility to respect human rights wherever they operate. Companies are therefore expected to take proactive steps to ensure that they do not cause or contribute to human rights abuses within their global operations and to respond to human rights abuses when they do occur. This implies establishing due diligence processes to identify, prevent, mitigate and record potential and actual adverse human rights impacts.

Although the EU has not played a constructive role at the Geneva negotiations for a UN Treaty on business and human rights,[ii] some modest developments in the right direction have been made at the EU level to foster a culture of ‘doing business right’ among companies in certain industrial sectors. Put differently, the EU has adopted regulations and directives that implement the UNGPs.

Due diligence requirements are the most common way of ensuring that business behavior meets social expectations. An example of this is the new EU Conflict Minerals Regulation (Regulation),[iii] which requires EU companies to ensure the responsible sourcing of minerals and metals. This EU law has an extraterritorial reach since due diligence requirements must be exercised by a company throughout its international supply chain. However, the Regulation raises a number of challenges ahead that may affect its purpose and implementation.

Conflict Minerals in the EU

In 2013, global trade in so-called 'conflict minerals' such as tin, tantalum, tungsten and gold (3TG) ores, concentrates, and metals was worth in excess of €123 billion.[iv] The EU has become one of the main destinations for these conflict minerals, which end up in products such as phones, computers, cars and jewelry.[v] Member States depend on the importation of mineral raw materials by European companies to sustain their modern-day high-tech societies. At the same time, the extraction of and trade in these minerals have been linked to corporate abuses (including human rights violations and environmental degradation) and have fueled some of the world’s most brutal conflicts in weak or unstable countries such as Colombia, the Democratic Republic of Congo (DRC), the Central African Republic (CAR) and Zimbabwe. In Colombia, the mining of tantalum, wolframite, coal and gold, which is controlled and taxed by armed groups, has cost the lives of millions and led to the forced disappearance of millions of others. This situation is also witnessed in the eastern DRC, where trade in tin, tantalum, tungsten and gold has provoked violent conflict in the provinces of North and South Kivu for almost a decade and a half. Similarly, in the CAR the trade in gold and diamonds has financed the conflict between the Seleka and the anti-Balaka.[vi] Although evidence shows that these minerals are associated with conflict, they are still used in products that are traded and sold on the European market.

Against this background, Guiding Principle 7 calls on States to assist businesses that are exposed to a greater risk of involvement in human rights abuses. Such assistance includes passing laws that require businesses to set in place adequate forms of human rights due diligence.

Responsible Mineral Supply Chain Efforts in the EU

In March 2014, the European Commission proposed a regulation to help reduce the financing of armed groups and security forces through mineral proceeds in conflict-affected and high-risk areas. The proposed regulation introduced a voluntary system of self-certification for 300 EU traders, 19 EU smelters/refiners, and over 100 EU manufacturers of components and semi-finished goods based on those minerals and metals. However, it lacked ambition, and the Commission’s non-legally-binding approach predominated in the text.

The proposal was a disappointment for civil society organizations and the European Parliament, which argued that a system of voluntary self-regulation would not be sufficient to convince EU upstream companies to take meaningful steps to improve their supply chain due diligence and demanded a strong mandatory law that would require all EU companies trading in minerals to undertake basic checks on their supply chains.[vii] In 2015 the European Parliament voted for radical amendments aimed at creating binding due diligence requirements on both upstream and downstream companies that bring minerals into the EU.[viii]

In 2016, after months of trilogue negotiations, EU institutions reached a political understanding on a law aligned with other landmark initiatives aimed at ensuring that minerals are sourced responsibly and do not fund conflict or human rights abuses, including the OECD Due Diligence Guidance for Responsible Supply Chain of Minerals from Conflict-Affected Areas and High-Risk Areas (OECD Due Diligence Guidance or OECD Guidance), Resolution 1952 (2010) endorsed by the UN Security Council, section 1502 of the US Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and various laws passed by several African countries, including the DRC and Rwanda, requiring companies to check their supply chains. The legal text of the EU Conflict Minerals Regulation was adopted and published early in 2017.

Aim, Scope and Obligations of the EU Conflict Minerals Regulation

The EU Conflict Minerals Regulation, which will enter into force on 1 January 2021, aims to ensure that minerals entering the EU do not finance conflict or result in human rights violations. The geographical scope of the EU Regulation is broader than its American counterpart, the Dodd-Frank Act,[ix] and targets imports not only from conflict zones and areas where a risk of armed confrontation exists but also from failed states and areas where widespread and systematic violations of international law, including human rights abuses, occur.[x] However, it excludes countries that are not conflict-affected or failed but in which documented links exist between grave human rights violations and minerals extraction, such as the use of child labor for hazardous work in Ghana’s gold mining industry.[xi]

The Regulation’s material scope comprises the 3TGs (article 1), since these are the resources that are most mined in conflict areas or in mines that rely on forced labor. However, this means that other minerals linked to conflicts and human rights abuses (such as diamonds, rubies, cobalt, coal and jade) are not subject to the same checks on their supply chains.

In line with the OECD Due Diligence Guidance, the EU Regulation combines mandatory and voluntary elements for implementing supply chain due diligence measures. This requires EU-based companies trading in the 3TGs (importers, smelters and refiners)[xii] to take responsibility for their supply chains and adopt the measures needed to prevent their trade being linked to conflicts or human rights abuses. These due diligence measures consist of five steps: 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 an independent third-party audit of supply chain due diligence, and report annually on supply chain due diligence (articles 4-7).

This five-step due diligence framework is not addressed at companies whose annual import volumes do not exceed the specified thresholds included in Annex 1[xiii] or to downstream companies that import the same minerals into the EU as part of electronic or other products (article 1). These are significant omissions since conflict minerals find their way into Europe mainly via the manufacture of tablets and smartphones, while the volume thresholds could leave the door open to trade in conflict minerals through small importers.

Challenges to Achieving the Aims of the EU Conflict Minerals Regulation

Adopting an EU Regulation on conflict minerals is just the first step to meeting the commitment to break the links between conflict, human rights abuses and the sourcing of minerals. Challenges must still be overcome to ensure that all EU companies source their resources responsibly. These challenges, which include, among others, engaging EU downstream companies, potential market distortion and lack of sanctions, may affect the implementation of the EU Regulation.

Arguably, due diligence is most effective when it involves companies throughout the supply chain. EU downstream companies are excluded from the scope of the Regulation and could create loopholes in the due diligence scheme by importing conflict mineral-derived products. It is expected that these companies comply voluntarily with the due diligence requirements and report on their sourcing practices. One of the main challenges in this regard is therefore to determine how to make sure that these companies do not import conflict mineral-derived products, by taking all reasonable steps to identify and address any risks arising in their supply chains for minerals and metals coming within the scope of this Regulation. The Commission has stressed that it will press large-scale manufacturers to disclose details of any products that may contain conflict minerals.[xiv] In line with the OECD Due Diligence Guidance that applies to all companies in the mineral supply chain that supply or use minerals sourced from conflict-affected or high-risk areas, EU downstream companies must therefore be provided with the tools they need to provide regular information on the source of their minerals and their trading routes. For example, the OECD Guidance suggests that downstream companies should visit the smelters and refiners in their supply chains and require them to source responsibly. Otherwise corporate complicity in human rights abuses may arise from a company’s business relationship with the entities in its supply chain. In this context, the UNGPs state that businesses should treat the risk of causing or contributing to gross human rights abuses as a legal compliance issue wherever they operate (Guiding Principle 23). Long supply chains and complex business relationships may therefore threaten the implementation of the EU Regulation.

The Regulation compliance is not limited to EU economic operators. Companies in third countries are de facto obliged to comply with the OECD Guiding Note for Upstream Companies Risk Assessment[xv] in order to access the EU market. This may create market distortion in the formal sector in the form of less demand and lower prices for minerals from certain conflict regions due to EU importers disengaging with upstream companies from those regions that fail to mitigate the risk of dealing in minerals.[xvi] Indeed, this unintended impact occurred after the implementation of the Dodd-Frank Act[xvii] when countries covered by the law suffered an immediate collapse of their formal 3TG exports, affecting the people that the Act was intended to help. The Regulation is greater in scope, as it covers all conflict-affected and high-risk areas, making it much more difficult to create an uneven regulatory landscape that may cause market distortions. However, it should be accompanied by measures to be deployed through political, diplomatic, and development cooperation means in order to ensure the effective implementation of the Regulation. In March 2014, the European Commission and the European External Action Service (EEAS) published, at the same time as the Commission proposal, a Joint Communication entitled Towards an Integrated EU Approach for the responsible sourcing of minerals originating in conflict-affected and high-risk areas, proposing measures covering different areas of intervention (incentivizing measures for the private sector, measures for policy dialogue with third countries and development cooperation measures) in order to alleviate some of the unintended consequences of the Regulation, like the creation of de facto embargos from certain conflict regions. These actions aim to assist and build the capacity of relevant stakeholders to transpose the due diligence requirements into a national framework and legislation to formalize the informal and small scale mining sector in areas like the Great Lakes region. The implementation of these ‘accompanying measures’ is essential to ensure not only a uniform approach towards mineral supply chain due diligence but also a positive socio-economic impact in conflict-affected and high-risk areas.[xviii]

Nationally, implementing the Regulation depends on the responsible authorities designated by Member States. These authorities should conduct ex-post checks on companies (article 10-11), be engaged, and have enough resources to fully implement the Regulation, otherwise the whole process involved in the responsible sourcing of minerals may slow down. It is noticeable that the Regulation focuses on compliance rather than on punishing companies (since it lacks sanctions). Member States set the rules that apply to infringements of the Regulation. When an infringement occurs, the competent authorities issue a notice of remedial action to be undertaken by the company (article 16). This hardly affects the conduct of EU upstream companies at all. Effective, dissuasive and proportionate sanctions would send out a clear message that failure to comply with the Regulation’s obligations will not be tolerated.

The Value of Experience with Other EU Due Diligence Law

Due diligence laws already exist at the national (French duty of vigilance law) and EU levels. This is not the first time that the EU has pursued due diligence systems through trade measures aimed at conditioning market access from third countries on compliance with EU values and standards. The EU Timber Regulation (EUTR), which aims to combat illegal logging, unilaterally extends obligations to all importers in order to prevent the placement of illegally harvested timber and its derived products in the EU market. Whether the timber is legal depends on whether it was harvested in accordance with the legislation applicable in the country of origin, even if that country is not a member of the EU.

The EUTR covers all companies that bring timber into the EU market for the first time. It requires companies to collect verifiable data on the timber’s origin so that it can be established that it was legally harvested for the entire chain of custody. Sometimes companies are also required to compile a risk inventory, analysis and assessment. However, as with the Conflict Minerals Regulation, certain types of timber and timber products are covered while other manufactured products such printed books, newspapers, manuscripts, musical instruments and seats with wooden frames are excluded.

The EUTR’s due diligence system affects business operations if the businesses wish to access the EU market, especially if they are from countries with high levels of corruption. Full implementation of the EUTR has been slow because the competent authorities in EU member states have been unwilling to begin enforcement.[xix] However, the situation is changing. Today, according to the Commission’s EUTR scoreboard, all 28 Member States have begun to conduct checks on companies and designated a competent authority, while only one Member State (Slovakia) has no legislation on penalties for breaching the EUTR.[xx] In recent rulings in Sweden[xxi] and the Netherlands[xxii], competent authorities sanctioned companies for not collecting enough verifiable information to demonstrate that the purchase complied with the laws of the country of origin. These cases both prove this paradigm shift is occurring and help to clarify the practical aspect of the due diligence requirements for companies. However, there is a need to increase efforts and priorities to correctly and constantly implement and enforce the EUTR[xxiii] and to expand its scope so that all wood-based products are covered.

Despite the notable differences between the Conflict Minerals Regulation and ETUR in terms of regulatory goals and design, both regulatory regimes require importing companies to provide information on the behavior of their suppliers. Experience gained from implementing and enforcing the EUTR should be taken into account for the Conflict Minerals Regulation in order to secure traceability and transparency in the global mineral supply chains of EU companies. The EUTR proves that mandatory due diligence measures are enforceable and therefore more pressure can be mounted onto EU companies and non-EU companies. Many national authorities have a good understanding of the flexible, progressive nature of the EUTR’s due diligence system. Despite its recent full implementation, companies are taking significant steps to meet the due diligence standards (trade association materials and dialogue with authorities).[xxiv] Therefore, this experience should provide mineral-trading companies with the insights they need to fully meet their due diligence requirements, especially since the Conflict Minerals Regulation will not enter into force until 1 January 2021.

Concluding Remarks

The EU Conflict Minerals Regulation is to be welcomed as an important step towards the responsible sourcing of minerals and metals. It may also be seen as the EU’s response to translating the UNGPs into effective legislation and policies that may significantly influence business conduct and, therefore, to support businesses meeting their commitment to implement the Guiding Principles, especially with regard to the second pillar. Arguably, the positive effects of the Regulation may eventually pave the way for greater legally binding due diligence obligations for EU companies in other sectors that outsource their production to third countries. These may include measures aimed at securing traceability and transparency since the European Parliament has repeatedly requested that the Commission should include rules on corporate liability for violations of human rights in all trade and investment agreements.

However, despite the Regulation’s positive aspects and opportunities, several challenges must be seriously taken into account before it enters into force. To achieve the responsible sourcing of 3TG and mitigate the risk of incomplete due diligence chains, legally binding obligations on disclosing information about sources of minerals and trading routes must be extended to EU downstream companies. The EU should also take political and diplomatic measures to avoid market distortion and involve crucial third countries in supporting the implementation of the Regulation. The first review on the functioning and effectiveness of the Regulation, scheduled for 2023, is another opportunity to afford responsible authorities the competence to impose penalties on companies that do not comply with their obligations. Indeed, the three-yearly reviews should play an important role in establishing a more ambitious Regulation that broadens its scope to other minerals that are linked to conflicts and human rights abuses and its obligations to downstream companies.

Given that the Conflict Minerals Regulation does not enter into force until 2021, the EU, its Member States, and companies have both the awareness and the time to overcome some of the obstacles it presents. Experience with similar instruments in other jurisdictions should provide a reference for improving its implementation and enforcement. There are therefore no excuses for not fully meeting supply chain due diligence requirements at this first stage of the process towards the responsible sourcing of minerals and metals in the European Union.

[i] Directorate-General for External Policies, Implementation of the UN Guiding Principles on Business and Human Rights, http://www.europarl.europa.eu/RegData/etudes/STUD/2017/578031/EXPO_STU(2017)578031_EN.pdf.

[ii] Friends of the Earth, EU Fails to derail UN Treaty Negotiation, http://www.foeeurope.org/un-binding-treaty-eu-derails-311017.

[iii] Regulation (EU) 2017/821 of the European Parliament and of the Council of 17 May 2017 laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas, L 130/1.

[iv] European Commission, Website for DG Trade, http://ec.europa.eu/trade/. 

[v] See “A conflict minerals regulation that works. Strengthening the European Commission’s proposal for a ‘Regulation setting up a Union system for supply chain due diligence self-certification of responsible importers of tin, tantalum and tungsten, their ores, and gold originating in conflict-affected and high-risk areas’”, https://www.globalwitness.org/en/campaigns/conflict-minerals/conflict-minerals-shaping-eu-policy/.

[vi] See, “Breaking the links between natural resources and conflict: The case for EU regulation. A civil society position paper”, https://www.globalwitness.org/en/campaigns/conflict-minerals/conflict-minerals-shaping-eu-policy/.

[vii] For more information on these issues, see also Steffen van der Velde, The End of Conflict Minerals on the EU Market?, Asser Institute Policy Brief 2017, pp. 1-11.

[viii] European Parliament. Conflict minerals: MEPs secure mandatory due diligence for importers, http://www.europarl.europa.eu/news/en/press-room/20161122IPR52536/conflict-minerals-meps-secure-mandatory-due-diligence-for-importers.

[ix] The Dodd-Frank Act applies only to the Democratic Republic of Congo (DRC) and nine adjoining countries.

[x] The European Commission is preparing guidelines to help firms identify conflict-affected and high-risk areas. The guidelines should be ready by the end of 2017.

[xi] Chiara Macchi, The Draft EU Regulation on Conflict Minerals: “Smart Mix” or Missed Opportunity? http://rightsasusual.com/?p=1106.

[xii] According to Commission estimates, the regulation applies directly to between 600 and 1,000 EU companies.

[xiii] The threshold for tin ores and concentrates is set at 5,000 kg, and for tungsten and concentrates at 250,000 kg. The threshold for tantalum or niobium and ores is to be determined through a delegated act of the Commission pursuant to article 1(2)(a) and article 15(b) Regulation.

[xiv] European Parliament. Conflict minerals: MEPs secure mandatory due diligence for importers, http://www.europarl.europa.eu/news/en/press-room/20161122IPR52536/conflict-minerals-meps-secure-mandatory-due-diligence-for-importers.

[xv] See OECD Guiding Appendix to Supplement on Tin, Tantalum and Tungsten, Guiding Note for Upstream Company Risk Assessment, p. 54.

[xvi] For more information on these issues, see Enrico Partiti and Steffen van der Velde, Curbing Supply-Chain Human Rights Violations Through Trade and Due Diligence. Possible WTO Concerns Raised by the EU Conflict Minerals Regulation, T.M.C. Asser Institute for International & European Law 2017-02.

[xvii] Commission staff working document impact assessment, SWD (2014) 53 final, Brussels, 5 March 2014, pp. 26-28.

[xviii] EurAc, Accompanying Measures to the EU Regulation on the Responsible Sourcing of Minerals. Towards a strengthening of the governance of the artisanal mining sector in the DRC, https://www.tecnologialibredeconflicto.org/wp-content/uploads/2017/04/EurAc2017-executive-summary.pdf.

[xix] See Wybe Th. Douma, Towards a ‘due diligence’ jurisprudence: The EU Timber Regulation’s requirements in courts, Doing Business Right Blog, 27 July 2017.

[xx] See EUTR newsletter from ClientEarth: https://www.clientearth.org/eutr-news-march-2016-to-march-2017/. 

[xxi] Förvaltningsrätten Jönköping (Jönköping Administrative Court), 5 October 2016, case nr. 2095-16, Almträ Nordic AB v Skogsstyrelsen.

[xxii] B.V. X v de staatssecretaris van Economische Zaken, Rechtbank Noord-Holland 24-05-2017, AWB - 16 5358, ECLI:NL:RBNHO:2017:4474. 

[xxiii] For more information about how Member States implement and enforce the EUTR, see https://www.clientearth.org/eu-timber-regulation-implementation-and-enforcement-updates/.

[xxiv] Timber Design and Technology, Big brands back battle against illegal timber, http://www.timberdesignandtechnology.com/big-brands-back-eu-battle-against-illegaltimber/.

This event co-organised with FIDH and SOMO aims to provide a detailed overview of the latest developments in the field of BHR regulation. The first part of the afternoon will be dedicated to a comparative review of some national developments in BHR regulation. The speakers have been asked to focus their presentations (max 10 minutes) on outlining the recent (and sometimes future) changes in the various regulatory models introduced by specific European states. They will also discuss the (expected) effects of the different regulatory models based on comparative analyses and empirical data gathered so far.

The second part of the afternoon will then focus on discussing the latest draft of the proposed binding treaty on BHR. The speakers have been asked to prepare short presentations (max 10 minutes) on the strengths and weaknesses of the current draft (with an eye on the changes introduced with regard to the Zero draft). The presentations will be followed by open exchanges with the participants on the various points raised (including concrete proposals for improvement).

Where: Asser Institute in The Hague

When: 14 November from 13:00

Draft programme: 

13:00 – 13:15 Welcome

13:15 – 15:00 - BHR regulation: Recent Developments in Europe – Chair Maddalena Neglia (FIDH)

• Nadia Bernaz (Wageningen University) – Recent developments in the UK
• Anna Beckers (Maastricht University) – Recent developments in Germany
• Antoine Duval (Asser Institute) – Recent developments in France
• Lucas Roorda (Utrecht University/College voor de Rechten van de Mens) – Recent developments in the Netherlands
• Irene Pietropaoli (British Institute of International and Comparative Law) – Recent developments in BHR regulation: A comparative perspective

15:00 – 15:15 Coffee Break 

15:15 – 17:00 – Revised Draft of the Binding BHR Treaty: Strengths and weaknesses – Chair Mariëtte van Huijstee (SOMO)

• Nadia Bernaz (Wageningen University)
• Anna Beckers (Maastricht University)
• Antoine Duval (Asser Institute)
• Irene Pietropaoli (British Institute of International and Comparative Law)
• Lucas Roorda (Utrecht University/ College voor de Rechten van de Mens)

17:00 -  Closing Reception.

This event is organised with the support of:

The six months between 2012 and 2013 represented a turning point for the garment industry. On 24 April 2013, the Rana Plaza building collapse in Bangladesh killed more than 1100 workers. Just a year before, more than 350 garment workers died in two factory fires in Pakistan and Bangladesh. These three tragedies, among the deadliest industrial disasters in recent times, generated a previously unseen level of outrage to which followed a considerable mobilisation by civil society, business communities, States, and international organisations. Apart from the horror stemming from the loss of lives, mostly of young women, the three catastrophes were particularly shocking for Western audiences as they exposed our ignorance and even complicity. It turned out that we - the consumers – turn a blind eye to the working conditions, including health and safety, of garment workers. Thereafter, it was impossible to ignore that well-known brands we regularly purchase were connected to these production sites, which were regular suppliers of many European and American clothing companies.

A certain consensus has since then coalesced around possible means to avoid the reoccurrence of such tragedies, which has pivoted on the concept of corporate due diligence in investigating the impact of their operations and taking measures to protect human rights. Due diligence relies heavily on corporate practice in defining and implementing strategies limiting their negative impact. Initiatives at the national level such as the Dutch Agreement on Sustainable Garment and Textile can be seen as interesting attempts to constrain into a more structured frame the due diligence process. The question, as usual, is whether this is enough.

Changing supply chain and novel transnational regulatory approaches

In Twenty-First century capitalism, manufacture spans across the globe in global value chains. Corporations in Western countries are connected to myriads of suppliers and contractors responsible for different steps in the production process. In the garment industry, retailers in the Global North are connected through a network of contractual relations to independent entities across the world which, in turn, often subcontract production and assembly to other firms and producers all the way down to those responsible for the production of inputs such as cotton and other fibres. The retailer has little influence on all these entities, and its control remains often indirect at best. Global value chains make it difficult for companies to structure their relations with their suppliers in a way which limits the negative impact linked to their activities. In addition, also single States are impotent in the regulation of diffuse supply chains if they want to limit their negative impact on human rights, labour rights, and the environment. Indeed, the contribution from countries where production is located is essential, especially for the enforcement of labour and health and safety standards. Also corporations are required to step up their efforts in dealing with their partners in the supply chain.

The several regulatory efforts initiated in the aftermath of the Rana Plaza illustrate a novel multi-actor, multi-level, and less top-down approach to the regulation of transnational business conduct which aims at overcoming the jurisdictional constraints of State rules. The proliferation of global value chains and their increased impact coincided with a process that, under international law at first, switched the consensus about which actors should be responsible for regulating supply chains, and by means of which tools. This process culminated with the United Nations Guiding Principles on Business and Human Rights, that affirmed the principle of corporate responsibility to respect human rights. Corporate due diligence was chosen as a regulatory strategy to ensure the protection of human rights. Due diligence is a continuous process which requires enterprises to assess actual and potential human rights impact directly linked to their activities. Companies must design strategies to proactively minimise and correct their negative impact.  Transparency in the form of communication of corporate impact to external stakeholders is an important component of due diligence. Companies are expected to regularly report about the effects of their operations and the corrective response taken in order to build trust of all actors involved, including workers, consumers, NGOs, and even investors.

It is within the framework of these principles that the many public and private regulatory efforts that followed the Rana Plaza disaster must be understood. As initiatives in the area of garment have proliferated, a peculiar form of ‘division of labour’ began to take shape at the transnational stage. On the one hand, initiatives involving trade unions, business actors, States and international organisations such as the ILO, have addressed worker safety in Bangladesh,[1] and compensations and reparations for the families of the victims.[2] On the other hand, States aimed at improving working conditions in Bangladesh through programs focused on training and capacity-building.[3] Other initiatives took a ‘global’ approach by creating mechanisms capable of harnessing business conduct generally, and not just in a specific country. Crucial OECD work has focused on the practical implementation of due diligence procedures. Thus, the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector constitutes one of the first sector-specific implementing document of the OECD’s set of standards for responsible business conduct - the OECD Guidelines for Multinational Corporations, the first version of which dates back to 1976. 

Enter the Dutch Agreement on Sustainable Garment and Textile

The Dutch Agreement on Sustainable Garment and Textile is one of the first initiatives at the national level supporting the implementation by corporate actors of their due diligence obligations. At the same time, it attempts to ‘harden’ business obligations to perform human rights due diligence in the supply chain, and provides means to enforce an obligation which could not stem from the UNGP. The Agreement represents an interesting example of multi-stakeholder efforts in the regulation of fundamental socio-economic issues, where industry organisations, trade union, non-governmental organisations and the Dutch government agreed to join forces to ensure responsible business practices in the global garment and textile supply chain.

The Agreement expressly builds on the UN Guiding Principles and on the OECD Guidelines in order to i) making progress in 3-5 years towards the improvement the conditions of groups affected by adverse impacts in respect of specific risks in the garment and textile supply chains; ii) to provide business actors with a set of tools for preventing their operations and production from negatively impacting on their supply chain; iii) to develop joint projects to address issues that single companies could not tackle successfully. The Agreement was signed in July 2016 by 55 companies with their representative organisations - together constituting around 30% of the sectors in the Netherlands, 5 NGOs, the Dutch trade unions, and the Government. Signatories are expected to engage with business actors which did not enter into the Agreement and urge them to sign, so that the market shares of the companies involved reaches at least 50% by 2018 and 80% by 2022.

The commitments made by the enterprises

Enterprises party to the Agreement assume certain obligations, the main of which being the inclusion of nine ‘themes’ in their internal policies for responsible business conduct. Interestingly, the Agreement takes up a broad scope with respects to the supply chain risks which corporations must tackle, including not just human rights and work-related issues such as forced labour, freedom of association and living wage, but also safety and health concerns, and even gender themes, environment and pollution, and animal welfare. The detailed components of each specific theme are laid down in the Annexes to the Agreement. The obligation to address these issues is operationalised via due diligence processes which, in line with the OECD Guidance, must be communicated to all partners in the supply chain and other stakeholders, and must be performed in a manner proportionate to the size of the business and the specific circumstances of the operations.

 The commitment to conduct due diligence on the nine themes identified in the Agreement is far from being just hortative. In the first place, companies are given access to a set of tools for implementation provided for by the Secretariat. Corporate signatories are then required to annually submit an ‘action plan’ for assessment and approval by the Secretariat of the Agreement. Such an ‘action plan’ does not seem to be contemplated by the OECD Guidance, which only refers to a Corrective Action Plan with a different content. The action plan is not available to the public in light of confidential business information about suppliers and pricing policies. Nonetheless, the information required therein forces companies to gather information about their operations and to reflect upon their own practices. The plan must present the insights gained through due diligence about the structure of their supply chain. It must address how specific purchase practices of the companies, including prices, delivery times and duration of the contacts of supply, may increase risk in their supply chain. The action plan also requires companies to substantiate their policies with regards to the nine themes, and formulate measurable targets for improvement.

The Agreement explicitly stresses the ‘business case’ for an early-mover engagement in responsible production. Indeed, it allows signatories companies to anticipate the growing trend of mandatory due diligence, which is particularly noticeable in the EU. After the Directive on non-financial reporting and the Regulation on conflict minerals, the European Parliament has recently tabled a Motion to require the Commission to propose mandatory regulation for the garment supply chain. Different from mandatory due diligence as laid down, for example, in the conflict minerals Regulation, the Agreement does not contemplate third party auditing of due diligence, the outcome of which must normally be made public by companies. In any event, signatory corporations to the Agreement can publicise their participation, can rely on the support of other parties in its implementation, and have access to a growing corpus of best practices that the signatories are going to share within the framework of the Covenant. Companies can also rest assured that, in case information arises concerning an enterprise’s adverse effects in the supply chain, other parties (presumably NGOs) will not make the information public before the elapsing of a two-week period during which the involved company must produce a ‘satisfactory result’.

Institutional features, mechanisms for review and dispute settlement

Certain institutional features constitute the most innovative and interesting elements of the Agreement, which sets up permanent institutions responsible for monitoring companies’ action plans and for settling disputes. The Steering Group and its Secretariat are instrumental in overseeing compliance with the Agreement, in pushing companies towards respecting the commitments in their action plans, and in ensuring that continuous improvement takes place. The Steering Group, which acts by consensus and whose composition reflects the multi-stakeholder character of the Agreement, is responsible for its day-to-day management and possible projects for its implementation. The Steering Group is supported by a Secretariat.

The Secretariat serves as a central source of expertise, training and support for enterprises in the area of due diligence. Its most important task is, however, the assessment of companies’ action plans elaborated within the frame of their due diligence obligation. The assessment is performed against the text of the Agreement itself, the OECD Guidance, and the context of operation of the enterprise under review. Specific elements of due diligence are under scrutiny as well, such as the way the company communicates its principles and policies for ‘international responsible business conduct’, and how these policies are implemented in its daily operations. The review shall also appraise the way the company has analysed risk of adverse impact, whether it has collected sufficient information about its supply chain, whether it has prioritised its activities, and investigated the correlation between its own practice and adverse impact.

The review of the action plan evaluates the undertakings for improvement both with respect to the reduction of its adverse impact, the monitoring of its suppliers and the insights acquired over its operations, and theme-specific suggestions made by the parties to the Agreement. Further, the Secretariat compares the companies’ objectives with respect to each of the nine themes. Companies with less ambitious goals and which may be expected to do more, given their size and context of operations, will be ‘asked’ to scale up their efforts. Under this scenario, the enterprise is given the opportunity to present a revised action plan after two months. The Secretariat is also empowered to randomly verify that the information supplied is accurate. Finally, the Secretariat prepares aggregated annual public reports of the results achieved and of the improvements in the supply chain.

The review of action plans is given a prominent place in the Agreement, although it seems to lack real enforcement tools. A dispute settlement mechanism is created to solve disagreements (that the Agreement defines as ‘disputes’) between the company and the Secretariat about its assessment. Such disputes are limited to the review of the action plans, and not the appraisal of other elements of individual due diligence. An independent Complaints and Dispute Committee will be appointed by the Parties, with the competence to assess whether, with specific respect to action plans, a signatory enterprise is acting in accordance to the Agreement. The ruling of the Committee is binding both on the enterprise in question and on the Secretariat, which is entrusted with monitoring compliance. In case a company fails to comply with the ruling of the Committee after the timeframe it has specified, all information the Secretariat possesses on the company in question, including the dispute proceedings, is released to the Steering Committee members, excluding the business ones. The Agreement does not clarify whether the reports can be made public. At this stage, the Steering Committee can then only ‘issue written reminders’ to urge compliance. In the presence of further disagreement over compliance with a decision of the Complaints and Dispute Committees, one or more parties to the Agreement can submit the question to arbitration by the Netherlands Arbitration Institute (NAI). The standard of review of the NAI is expressly limited to ‘review marginally’ whether or not the company is in compliance with the binding advice of Committee. As it can be seen, no sanctions stem from failing to comply with the Committee’s advice. This questions whether the Agreement actually provides with real tools to scale up ‘sloppy’ commitments, or even just to enforce current ones, apart from offering a platform for discussion and peer pressure.

A second mechanism is contemplated for ‘complaints’, which can be raised by any stakeholder suffering injury, loss, or damage caused by a company party to the Agreement. As a non-negligible limitation, the subject matter of the complaint must be ‘of material significance’ to the complaining party, and must be substantiated in relation to the responding business party. This mechanism however is only ‘residual’. To the extent it may overlap with the jurisdiction of another dispute settlement mechanism (arguably the National Contact Point for the OECD Guidelines), the Agreement gives precedence to the latter one. It can therefore be expected that the complaints mechanism under the Agreement will deal with, for example, complaints linked to themes which are outside the scope of the OECD instruments. While the subject of the complaint and the parties involved are made public, the rest of the proceeding is not accessible, and the parties must withhold any information. Also the public nature of the binding ruling can be questioned, as parties can require confidentiality for competition and privacy concerns. The Committee will rule on whether the company is acting in accordance with the Agreement. In case further failure to comply with a ruling of the Committee is due to a supplier which cannot be induced to cooperate, such supplier is black-listed and parties to the Agreement are no longer allowed to purchase from it. In case of ‘unjustifiable’ failure to comply, parties can release information to the public about the dispute as well as express their opinion on the failure to comply. As a measure of last resort, parties can also request to the Steering Committee that the enterprise in question is expelled from the Agreement.

The challenges lying ahead

The Agreement is a much needed step to ensure more responsible practices in the Dutch garment sector, and to foster corporate due diligence. Its most important contribution appears to be the establishment of a system to enforce voluntary commitments. However, its multi-stakeholder nature has required certain compromises limiting the extent of review of due diligence practice and the amount of insight the public can acquire about a specific company and its supply chain. Although companies are required to perform due diligence, it is unclear whether, and if so to what extent, the way the due diligence process is operationalised in practice is checked. This should be compared with the approach followed by recent EU legislation contemplating auditing of the processes implemented by enterprises, and thereafter the release of the findings. Granted, the power of peer pressure should not be underestimated as a check on companies’ action plans. The establishment of a permanent structure capable of exercising pressure on corporate entities to force them to respect their commitments, and eventually to scale them up, appears a sensible approach to engage companies in behaviour that, as of now, goes beyond legal provisions which would otherwise be applicable.

Within this frame, it is regrettable that action plans are not made available in a disaggregated form, so as to allow the public to evaluate the commitments entered into by specific corporations. If one of the purposes of the Agreement is to establish a framework for accountability with respect to their own commitments, then more transparency would have certainly be welcomed. Wouldn't it be sufficient to remove sensitive information from action plan? Generally, transparency can also allow the public to form a better understanding of the garment supply chain in which Dutch companies operate. Admittedly, the situation could improve, as companies are to decide - within 1 year from the entry into force - which information to disclose and - within 3 years - how to communicate individually to the public. Developments are still possible as companies are expected to begin implementation of their actions plans in July 2017. Future practice of the Secretariat, the Steering Committee, and especially of the signatory companies will be key to determine the impact of the initiative.

[1] Alliance for Bangladesh Worker Safety, supported by US businesses; Accord on Fire and Building Safety in Bangladesh, which features a tripartite structure.

[2] Rana Plaza Arrangement.

[3] Sustainability Compact for Bangladesh.

Editor's Note: Catherine Dunmore is an experienced international lawyer who practised international arbitration for multinational law firms in London and Paris. She recently received her LL.M. from the University of Toronto and her main fields of interest include international criminal law and human rights. Since October 2017, she is part of the team of the Doing Business Right project at the Asser Institute.

Background

At the United Nations Forum on Business and Human Rights from 27-29 November 2017 in Geneva, discussions focused on the central theme of Realizing Access to Effective Remedy. With an increasing focus on this third pillar of the United Nations Guiding Principles on Business and Human Rights, a working group of international law, human rights and conflict management specialists (Claes Cronstedt, Jan Eijsbouts, Adrienne Margolis, Steven Ratner, Martijn Scheltema and Robert C. Thompson) has spent several years exploring the use of arbitration to resolve business and human rights disputes. This culminated in the publication on 13 February 2017 of a proposal for International Business and Human Rights Arbitration. On 17 August 2017, a follow-up Questions and Answers document was published by the working group to address the principal questions raised about the proposal during the three-year consultation with stakeholders. Now, a drafting team is being assembled, chaired by Bruno Simma, to prepare a set of rules designed specifically for international business and human rights arbitration (the Hague International Business and Human Rights Arbitration Rules) in consultation with a wide range of business and human rights stakeholders. Once drafted, the rules will be offered to the Permanent Court of Arbitration and other international arbitration institutions and could be used in arbitration proceedings managed by parties on an ad hoc basis.

Introduction

Part 1 of this three-part blog series gave an overview introduction to the proposal for international business and human rights arbitration. This Part 2 focuses on (1) the potential advantages of using international arbitration to resolve such disputes, as well as (2) the substantial challenges the proposal will face in practice. Part 3 will then provide a case study of the Accord on Fire and Building Safety in Bangladesh’s binding arbitration process.

1.     The potential advantages of international business and human rights arbitration

The working group’s proposal to use international arbitration for the resolution of business and human rights disputes offers many potential advantages. As alluded to in Part 1 of this blog series, international arbitration can undoubtedly provide a more neutral forum, whereas domestic or international courts may face political pressure or judicial corruption. Arbitration would allow both parties to a dispute to select their own judges, who could, in theory, be impartial experts in business and human rights law and practice and accordingly more sensitive to the often complex issues at stake. This may particularly be welcomed in politically or emotionally charged human rights disputes. Additionally, international arbitration would allow for greater procedural flexibility and efficiency, as compared particularly to domestic court systems. Proceedings could be more tailor-made to fit both parties’ locations, means and resources, and resolved more swiftly than might otherwise be the case in business and human rights disputes. Other potential advantages include (a) the universal recognition of the arbitral award, and (b) an increase in supply chain responsibility.

a.     Universal recognition of the arbitral award

Final awards rendered in international business and human rights law arbitrations could include monetary damages, injunctive relief and close monitoring of future compliance. As the working group’s Questions and Answers document confirms, such awards could have the advantage of being enforceable under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). The New York Convention provides for the recognition and enforcement of foreign arbitral awards within its 157 State parties. The courts of each member nation must recognise foreign arbitral awards as binding and enforce them, unless the party against whom the award is being invoked can prove that there is reason to refuse enforcement. The limited grounds for refusing this universal recognition are outlined in Article 5 of the New York Convention, notably that:

• The parties to the agreement to arbitrate were under some incapacity or the agreement to arbitrate is not valid under the governing law or the law of the country where the award was made.
• The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present its case.
• The award contains decisions on matters beyond the scope or terms of the submission to arbitration.
• The arbitral authority’s composition or arbitral procedure was not in accordance with the parties’ agreement or, failing such agreement, the law of the country where the arbitration took place.
• The award is not yet binding, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made.
• The dispute’s subject matter is not capable of settlement by arbitration under the law of the country in which enforcement is sought.
• The recognition or enforcement of the award would be contrary to the public policy of the country in which enforcement is sought.

Accordingly, parties have an established means by which to achieve the recognition and enforcement of final awards handed down by tribunals in business and human rights arbitrations.

Although this could provide a clear route by which parties can receive any monetary damages, it may however be found lacking when it comes to potential long term monitoring and supervision requirements of any business and human rights arbitration award. Business and human rights arbitration tribunals might well require in the award that a party’s actions to remedy a particular human rights breach are supervised, and that its future compliance with human rights obligations is closely monitored. In this vein, additional mechanisms of enforcement and monitoring may need to be developed, perhaps along the lines of the Permanent Court of Arbitration’s Optional Rules for Conciliation of Disputes Relating to Natural Resources and/or the Environment.

b.    Increase in supply chain responsibility

As the working group explains, international business and human rights arbitration has the potential to “reinforce global governance” and might encourage and assist businesses to better manage their supply chains in order to avoid rights abuses. Businesses are increasingly altering their supply chain contracts to observe human rights norms, particularly in line with the United Nations Guiding Principles on Business and Human Rights. In this manner, international arbitration for the resolution of any human rights disputes could be inserted into the contractual terms and conditions between companies and their immediate business partners.

Precedent contracts between parent companies, subsidiaries, suppliers and contractors could simply be amended to include business and human rights commitments along with a business and human rights arbitration clause. They might include clauses requiring business partners to observe specific norms or to refrain from particular practices which might lead to human rights abuses. They could also include clauses granting potential victims, workers or members of affected communities the right to enforce the human rights clauses. Parent companies might use perpetual clauses to ensure effective supply chain responsibility, meaning that parties throughout their entire chain of subsidiaries, suppliers, contractors and subcontractors are required to insert the same provisions into their own contracts. As the working group’s Questions and Answers document explains, any defaulting party could then be subject to a binding business and human rights arbitration process brought by any party empowered under the contract to invoke proceedings.

These steps would create a chain of contracts that protect victims from human rights abuses and provide businesses with an avenue to reduce or eliminate the risk of abuse for which they may share a degree of responsibility (see previous blog: Lungowe v Vedanta and the loi relative au devoir de vigilance: Reassessing parent company liability for human rights violations). The availability of international arbitration could allow businesses to better manage their supply chains and facilitate responsible conflict management in the event of any human rights abuses.

2.     The challenges facing international business and human rights arbitration

The working group’s proposal to use international arbitration for the resolution of business and human rights disputes also raises many potential challenges. Careful consideration must be given to the existing limitations of international arbitration. For instance, compared to domestic court systems, arbitration offers limited options for the summary dismissal of spurious claims. The recourse mechanisms available to defendant corporations must be reassessed when developing business and human rights arbitration to enable the early dismissal of unfounded allegations. Another key area for debate, is which norms or laws would be applied by the arbitral tribunal in business and human rights disputes, and indeed whether they would recognise corporate liability for human rights violations. As evidenced through Kiobel v Royal Dutch Petroleum, Jesner v Arab Bank and Lungowe v Vedanta, the question of corporate liability for human rights violations under international and domestic law remains open in many jurisdictions. As for the possibility of incorporating voluntary guidelines such as the United Nations Guiding Principles on Business and Human Rights, attention must be paid to the potential implications of making soft law a binding and contractually enforceable obligation. A successful business and human rights arbitration mechanism must also work to overcome the existing criticisms of international arbitration, often focusing on cost and efficiency. Moreover, in contemplating whether party appointed arbitrators or a permanent standing arbitral tribunal is more appropriate, the working group must consider issues such as the role of arbitrator bias and experience, as well as the feasibility of having multiple decentralised offices if a Court of Arbitration for Sport model were to be followed. As briefly mentioned in Part 1 of this blog series, other potential challenges include (a) an inequality of arms between parties, and (b) the transparency of arbitration proceedings.

a.     Inequality of arms between parties

As the working group’s Questions and Answers document explains, often victims of businesses’ human rights abuses are poor and accordingly cannot compete on equal terms in disputes against well-resourced business opponents. Unfortunately, this inequality of arms issue might be compounded through the use of international arbitration, as its high party and common costs, alongside procedural complexity, could place victims at a significant disadvantage.

International arbitration has been described as a “rich man’s game, best left to large companies, insurers and organs of sovereign states”. Both parties to international arbitral proceedings generally incur:

• Administrative charges by the arbitral tribunal.
• Fees and expenses of the tribunal, external counsel, experts and specialist services, such as transcribers and interpreters.
• Hiring fees for hearing room(s) and facilities.
• Expenses of testifying witnesses.
• Significant costs for legal representation.

Accordingly, in promoting the international arbitration of business and human rights disputes, efforts must be made to deal with the inequality of arms that victims of rights violations may face when attempting to assert their rights, and how they might afford the costs associated with arbitration proceedings.

Indeed, the working group’s proposal explicitly recognises that victims may need assistance to help defray their arbitration costs and legal fees. Proposals for cost reduction in future international business and human rights arbitrations include:

• Facilitating representation of victims by human rights non-governmental organisations, labour unions and pro bono lawyers.
• Supporting arbitration proceedings in the same way as domestic litigation, through legal aid or the provision of third-party funding.
• The establishment of dedicated grants or the advance of funds (to be repaid from the proceeds of final settlements or arbitral awards) for the arbitration of business and human rights disputes. For instance:
• Private corporations, individuals, foundations and States could contribute to the establishment of a dedicated private trust fund. This would promote better access to justice for victims whilst also contributing to businesses’ corporate social responsibility objectives.
• A dedicated fund could be established by arbitral institutions which adopt the Hague International Business and Human Rights Arbitration Rules. One funding model would be the Financial Assistance Fund established by the Permanent Court of Arbitration, which aims at helping developing countries meet part of the costs involved in international arbitration.
• Centralised funds could be created, for instance within the European Union, by which access to common markets is contingent upon fixed contributions to support victims of businesses’ human rights violations.

In terms of costs and legal expenses allocation, a number of proposals have been put forward to ensure a greater equality of arms. These include:

• Contractual requirements in business and human rights arbitration clauses mandating that a losing company pay the arbitration costs and legal fees of winning victims.
• The granting of additional powers to international business and human rights arbitrators, allowing them to allocate costs and legal fees to winning victims or with consideration of the degree of fault demonstrated.
• Examining the use of fee-shifting arrangements. Traditionally this could mean that the loser pays the winner’s legal fees and costs, which may reduce initial hurdles for victims seeking to litigate but also increases their potential risk and exposure post-judgment. Another idea would be implementing reverse fee shifting, whereby successful victims are awarded their legal fees and costs without winning businesses being afforded the same luxury. The concept has previously been implemented in environmental suits bought by citizens in the United States to help overcome often prohibitive litigation costs.

Given the widespread interest in access to justice for business and human rights victims, there is certainly the potential for means of reducing and reallocating the costs involved in international arbitration proceedings. However, more thought must be given by the working group, the drafters of new arbitration rules and the business and human rights community as a whole to overcome the inequality of arms between well-resourced business corporations and their potential victims.

b.    Transparency of arbitration proceedings

One key factor behind the success of international commercial arbitration is confidentiality. The potential privacy of arbitral proceedings is a distinct motivator for business parties to resort to this means of dispute resolution over more public domestic litigation proceedings. However, when considering the arbitration of business and human rights disputes, the expedient element of arbitral confidentiality is challenged by an inconsistent concern for ensuring transparency in human rights cases. When adjudicating on disputes involving human rights violations of international concern, the public interest lies in having open, transparent proceedings. Additionally, as Justice Scalia recognised in AT&T Mobility LLC v Concepcion, 131 S. Ct. 1740 (2011), confidentiality “becomes more difficult” with class action arbitrations involving absent parties and potentially higher stakes. Accordingly, any rules for arbitrating business and human rights disputes must rethink standard arbitration provisions dictating party privacy, and take account of a need for greater transparency. Indeed, the working group’s proposal identifies as an issue for drafters of new arbitration rules, how “transparent the proceedings and awards should be and how to accommodate any confidentiality concerns that either side might have”.

The working group’s Questions and Answers document identifies greater transparency as a prerequisite for business and human rights arbitration, including the possibility of open proceedings for disputes as well as the potential for publication of human rights arbitral awards. When reassessing arbitral confidentiality, it is suggested that drafters of new arbitration rules will turn to the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules and the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration. These rules recognise “the need for provisions on transparency in the settlement of such treaty-based investor-State disputes to take account of the public interest involved in such arbitrations”, in a similar vein to the public interest in human rights litigation. They also explain that “that rules on transparency in treaty-based investor-State arbitration would contribute significantly to the establishment of a harmonized legal framework for a fair and efficient settlement of international investment disputes, increase transparency and accountability and promote good governance”. Such harmonisation in a legal framework for business and human rights arbitration would similarly augment accountability and promote good governance in the resolution of disputes.

The UNCITRAL Rules increase the public transparency of investor-state arbitration proceedings, notably authorising arbitrators to protect confidential business information and permitting the submission of amicus curiae briefs by third parties. They also require that repositories make all documents, including exhibits and expert reports, available in a timely manner, in the form and language in which they are received. Future rules governing business and human rights disputes might incorporate these principles, as well as considering public entry to, and online streaming of, arbitration hearings and the publication of pleadings and arbitral awards. This will necessitate consultations with international arbitration institutions, which do not routinely create public venues for observation of their proceedings and often decline to publically state the number and kinds of claims with which they deal. It will also be critical that arbitrators are fully informed of the legal and policy issues surrounding confidentiality in business and human rights cases, in order to appropriately resolve disputes arising between parties about privacy provisions.

As Judith Resnik has highlighted, publicity in courts can discipline businesses and governments by making visible how they treat judicial procedures and the claimants against them. Only through such “public processes, one learns whether individuals of all kinds [...] are understood to be persons equally entitled to the forms of procedure offered others to mark their dignity and to accord them respect and fairness”. Public access to the resolution of business and human rights disputes is paramount, and great attention must be paid by drafters to balancing the protection of sensitive business information with the need for transparent arbitral proceedings.

Conclusions

The working group’s proposal for international business and human rights arbitration is not intended to replace any existing means of redress. Its desire is to offer a potentially more effective alternative to current means of dispute resolution, rather than remove access to any existing remedies. Providing parties with a greater range of options to resolve business and human rights disputes will undoubtedly improve their ability to select a method most appropriate to their cause. The availability of international business and human rights arbitration would bring with it many potential advantages, including the universal recognition of arbitral awards, an increase in supply chain responsibility and responsible conflict management. However, the concept still has some way to go before it could succeed in practice. International arbitration proceedings must be heavily adapted, accounting for, amongst other factors, a likely inequality of arms between parties and the need for transparency in human rights proceedings, whilst the existing limitations of international arbitration must be reconsidered. Commentators from business, human rights and arbitration communities have reacted to the proposal with questions and concerns, and the working group, drafters of new arbitration rules and the business and human rights community as a whole face substantial challenges moving from concept to reality. Part 3 of this blog series will further discuss the arbitration of business and human rights disputes through a case study of the Accord on Fire and Building Safety in Bangladesh’s binding arbitration process.

Editor’s note: Benjamin Thompson is a PhD candidate in business and human rights at Tilburg Law School in the Netherlands. His PhD research deals with the effects of the UN Guiding Principles on Business and Human Rights' endorsement of operational level, non-judicial grievance mechanisms and their role in improving access to remedy. He recently published an article for Utrecht Law Review’s Special Issue on Accountability of Multinational Corporations for Human Rights Abuses which discussed the roles the new Dutch multistakeholder initiative with the Dutch banking sector might play in improving banks’ performance with respect to human rights.

In November of last year the Asser Institute offered me the opportunity to take part in a roundtable on the Dutch Banking Sector Agreement (DBA), as part of their Doing Business Right Project. Signed in December 2017, the DBA is a collaboration between the banking sector, the government, trade unions and civil society organisations (CSOs), all based within the Netherlands: the first of its kind. It focuses on banks’ responsibility to respect human rights, as stipulated in the UN Guiding Principles on Business and Human Rights (UNGPs) and OECD Guidelines for Multinational Enterprises (OECD Guidelines), within their corporate lending and project finance activities. The DBA has been something of a hot topic in business and human rights circles. However, it has not yet published a public monitoring report, making any evaluation of its performance at this stage difficult. During the roundtable, we discussed the role of the DBA as a potential means to improve the practices of Dutch banks with respect to human rights. A key challenge identified from this discussion, as reported here, was the various ‘interpretive ambiguities inherent in the UNGPs’. A key conclusion was that ‘further dialogue is required... to ascertain what conduct on the part of the banks is consistent with international obligations’.

This is not a unique conclusion to arise from multistakeholder discussions on banks and human rights; the discussion often focuses on what financial institutions are required to do to meet their responsibility to respect human rights under the UNGPs. So much so that questions concerning implementation or evaluation are often left by the wayside. As a result, when presenting my research on the DBA for the Utrecht Centre of Accountability and Liability Law’s Conference on ‘Accountability and International Business Operations’, published here, I decided to focus on how the DBA had responded to those key points of friction where there is the greatest disagreement between how different stakeholders conceive banks’ human rights responsibilities. This blog post seeks to build on this previous entry, hopefully without too much repetition.

Banks and Human Rights

So, how do the UNGPs apply to banks? Well, there is hardly a dearth of initiatives set up with exactly that question in mind. We have had various OECD initiatives providing analysis on banks’ human rights responsibilities, the UN Environmental Programme’s Financial Initiative, the OHCHR and UN Working Group on transnational corporations and human rights’ pronouncements on this matter, the Thun Group’s discussion papers (2013, 2017a and 2017b) on the UN Guiding Principles and now the DBA. While some have pointed to the interpretive ambiguities within the UNGPs as themselves preventing any emerging consensus, and I am certainly not denying there are interpretive ambiguities (there are), I would suggest this is not, in practice, the key challenge in banks developing practices consistent with the UNGPs. Banks’ interpretation of the UNGPs is largely eclipsed by their own preconceived understandings of their existing due diligence processes with respect to social and environmental risks (E&S due diligence), which originate before the UNGPs and are arguably rooted more robustly in a market-based paradigm. While banks have, at times, expressed concerns over whether their existing E&S due diligence procedures can adequately incorporate the full range of behaviour required under the UNGPs,[1] there has been a considerable effort amongst some banks to interpret the UNGPs in line with their existing practices.

This is perhaps best illustrated in the Thun Group’s 2017 discussion papers which dealt with questions as to how the UNGPs applied to banks, in particular how banks should understand their involvement in human rights impacts related to their financing activities. The paper suffered from various deficits of interpretation (that banks cannot contribute to human rights harms, they have no role in remedy, due diligence is largely limited to whether and how to approve a financial transaction etc.). The paper was such an affront to the UNGPs that it prompted John Ruggie, the main architect of the UNGPs, to write an open letter pointing at many of these failings. A representative of the Thun Group, Christian Leitz responded to say the paper was an ‘industry perspective’ and that he would welcome Ruggie and other stakeholders’ views in order to foster a discussion. Ruggie responded stating that many of the (quite stark) failings of the Thun Group paper to encapsulate the intention of the UNGPs did not amount to rival ‘opinions’ or ‘interpretations’ but were ‘factually incorrect’ and that it would be difficult to have a dialogue based on ‘alternative facts’.

While it might be true that the banks interpretations are ‘factually incorrect’ or, as David Kinley put it, that the recent Thun Group paper is simply an attempt by banks to dodge their human rights responsibilities all-together, how are we to understand this misalignment between banks’ understanding of the UNGPs and the logics of the UNGPs themselves (assuming ‘we’ share a kinship with the business and human rights project)? One can say that the Thun Group is failing to take its human rights responsibilities seriously; one can probably also cast that claim to include a much broader range of business enterprises and industries. However, to the extent to which businesses are not accepting and internalising the norms of the UNGPs, it is perhaps equally accurate to say both that businesses are failing to meet the UNGPs and that the UNGPs are failing in their ‘norm-building’ mission, with its key objective of ensuring business enterprises accept their responsibility to respect human rights as part of their business practices. Any serious proponent of the ‘business and human rights project’, must therefore understand the need to identify where the tensions are between industry perspectives and the UNGPs, and seek to evaluate which initiatives (if any) are successful (or partly successful) in bringing business enterprises’ understanding of their human rights responsibilities closer to that understood in the UNGPs. It is from this question of the extent to which banks are moved to a greater alignment with the normative requirements of the UNGPs that I will evaluate the Dutch Banking Agreement (DBA) as a multistakeholder agreement.

Given the backdrop of divergences over attitudes to banks and human rights, the DBA plays an important role. It is the only initiative which has actually reached any output on banks responsibility to respect human rights which is based on consensus. The initiatives cited above stem from organisations which represent a single type of stakeholder (States or banks), which may or may not consult other stakeholders but never require multistakeholder consensus for an output to be reached. Below is an analysis in how these divergences have been bridged somewhat in the text of the DBA, according to five identified divergences between the UNGPs and banks E&S due diligence processes. The description of banks’ perspectives with respect to their own E&S due diligence processes and human rights in the subsequent sections are principally taken from financial institutions’ responses to an OECD survey on environmental and social risks and the Thun Group papers: the Thun Group represents some of the world’s largest banks.

1.     ‘responsibility to respect’ vs ‘opportunity to affect’

While the UNGPs understand the actions businesses must take with respect to human rights as one of ‘responsibility’, E&S due diligence is more often understood as good business or ‘opportunity’.[2] This not only has connotations for both how banks see the nature of their practices with respect to human rights but also how they define the content of what is required. For instance, the contexts in which banks take action is often understood by the extent to which they have the opportunity to enact change in a client’s behaviour, rather than their responsibility for an impact (e.g., causing, contributing, directly linked, no link). Banks are happy to include ‘forward looking’ risk mitigation measures as part of their practices but are often reluctant to accept that they should take actions which imply a greater responsibility for the impact on their part. When understanding the application of the UNGPs, banks have often not considered themselves to be in even the lowest category of involvement (directly linked) in relation to human rights harms connected to their activities, preferring to consider themselves as not involved or ‘indirectly linked’.[3] Some have completely ruled out the relevance of remedy.[4] Banks have received more approval when they have discussed what they ‘could do’ compared to what they ‘should do’, where they are notably more ambitious. This led to a much more welcomed reaction to the first Thun Group paper in 2013, which focussed on operational principles, compared to more criticised Thun Group papers in 2017, which focussed on foundational principles.

The DBA commits adhering banks to meeting the responsibility to respect human rights, as understood in the OECD Guidelines and UNGPs (article 1). Adhering banks have all signed declarations of adherence to the Agreement stating that they are bound by the Agreement. However, as some of the requirements of the DBA go beyond the responsibility to respect (e.g., article 10 on Sustainable Development), it is not always clear which aspects of the DBA the stakeholders consider to be part of their responsibility to respect human rights and which arise solely from the Agreement itself.

One particularly progressive element of the DBA is its inclusion of remedy, referred to under the article ‘Enabling Remediation’. This article looks at the steps a bank can take to ensure their client’s provide remedy for human rights harms, and it also raises the question of how impacts can be addressed or remediated based on the categories of a bank’s involvement in human rights impacts. However, it omits any explanation of the categories of a bank’s involvement, leaving this to further exploration by a working group, which promises to incorporate guidance provided by the OECD. The findings of the working group are to be integrated into the practices of the adhering banks. Banks are required to have individual complaints mechanisms open to clients and third parties, but the DBA makes clear these are not grievance mechanisms as understood in the UNGPs/Guidelines (article 3.5). Banks seem to need only to report on steps taken to prevent and mitigate impacts in their annual reports used by the DBA’s monitoring committee, covering their implementation of articles 3 (on policies) and 4 (on due diligence) but not article 7 (on enabling remediation).

2.      ‘risks to people’ vs. ‘risks to bank’

E&S due diligence is principally concerned with risks that could present a liability to the financial institution; human rights risks are considered risks to the bank rather than risks to people, although these risks may coincide. This market-based paradigm depends on adverse impacts on a bank’s bottom line as the key incentive for a bank to carry out due diligence, and it also acts as a disincentive for banks to take action where doing so might deprive them of a business opportunity.[5]

When responding to an OECD survey on how financial institutions understand how the OECD Guidelines apply to them, financial institutions were asked what factors influences how much leverage they had. Banks largely identified risks falling under ‘risks to the bank’[6] as the main factors rather than factors that an outsider might see as more linked to the UNGPs understanding of leverage: the ability to influence a situation. Commercial providers of E&S risk information for use in E&S due diligence, such as Reprisk, still view environmental and social risks as those risks to the bank: to a bank's reputation, to banks complying with national law and to a bank’s finances.

The DBA looks to risks to people as the basis for what action should be taken (article 4.2). It recognises that this goes beyond existing E&S due diligence practices, and it expects banks to report on their human rights performance under the UNGPs Reporting Framework which requires that businesses look at impacts on people not themselves. Two occasions where a ‘risks to bank’ lens may enter the Agreement’s implementation is through the cross referencing of initiatives which do adopt this paradigm (the IFC Performance Standards and Equator Principles) and through mentioning that banks terminate their relationships where the client has broken ‘material due diligence requirements’ (article 4.3.b).

There is also reference to a concern over the potential financial implications for banks resulting from more robust human rights practices: the need to produce a ‘level playing field’ internationally (article 4.5.b).  However, at no point is it suggested that banks’ compliance with the DBA is contingent on them not being placed at a competitive disadvantage as a result. Overall, the ‘risks to bank’ paradigm is minimal and the ‘rights to people’ paradigm is kept central to the DBA.

3.     ‘transactional due diligence’ vs. ‘human rights due diligence’

Banks’ due diligence is commonly understood to primarily cover those actions taken by banks up to the point where the transaction takes place as opposed to the full duration of the business relationship as under the UNGPs. The types of measures expected will depend primarily on the type of financial product offered, the type of client and their overall risk profile. Banks have consequently interpreted those terms within the UNGPs/Guidelines which refer to actions moving beyond the client of actions required after the point of transaction narrowly, understanding value/supply chains as limited to their own suppliers[7] and not recognising any role for termination of relationships or remediation.[8] The Thun Group papers introduced ‘new’ terms to the UNGPs – unit of analysis and proximity – which largely sought to reconstruct the UNGPs to fit within this transaction based model, limiting how directly linked a bank was, and the actions a bank should take, to the type of transaction and which member of a corporate group the bank made the transaction with.

The DBA recognises that adhering banks should base what kinds of action they take based on the severity of the (potential) impact rather than the nature of the transaction (article 4.3(a)). The due diligence provisions do not state that actions to identify, prevent and mitigate human rights impacts are limited to the lead up to the transaction, and they expressly require the banks to monitor, track and assess the outcomes of their due diligence. It also stresses the need to look to creative means of exercising leverage (article 9).

The DBA covers many of those aspects of the UNGPs which banks have been reluctant to include in their policies and which have been hitherto overlooked by the Thun Group – termination of business relationships, value chains and remediation – albeit in a more diminished way than some of the other responsibilities under the UNGPs. Value chains are limited to those mapping exercises under the text and decided upon by the parties to the DBA, and identification of impacts in value chains is not expressly part-and-parcel of a bank’s human rights due diligence processes, which are largely limited to actions to be taken with respect to the client (article 4). Termination of relationships is mentioned as a possible action where a client is repeatedly not able or willing to comply with material due diligence requirements, but this is left entirely to the discretion of the bank (article 4.3(b)). Thus, the DBA accepts the need for more than a transactional due diligence approach, adopting an understanding closer to the human rights due diligence approach in the UNGP/Guidelines.

4.     ‘client-only engagement’ vs. ‘stakeholder engagement’

Banks limit themselves primarily to engaging with their client and not external stakeholders, as understood in the UNGPs. Engagement with external stakeholders is often considered the responsibility of the client, not the bank. Unfortunately, client-only engagement plays a dominant role in the DBA. All mention of meaningful consultations with stakeholders is the duty of the client, with banks expected to influence clients to do so, rather than also the responsibility of the bank. The DBA itself seeks to collaborate with the OECD, but does not expressly set up platforms for engagement with rights-holders. Inclusion of the CSOs and unions which are party to the DBA is itself seen as stakeholder engagement, and the CSOs and unions are expected to empower ways of interaction with affected stakeholders (article 12(a)), but this requirement is placed only on CSOs and there is no equivalent requirement on the adhering banks. Within the DBA itself, inclusion of rights-holders appears to depend on representation through the CSOs and unions. The text of the DBA sets up a dispute resolution mechanism, but this is again only open to parties of agreement; the DBA has no grievance mechanism open to external stakeholders to complain about its implementation, despite this being required under the UNGPs (article 13.3).

5.     ‘knowing and withholding’ vs. ‘knowing and showing’

In the UNGPs, there is an understanding that the relationship between civil society and business will move from ‘naming and shaming’ – whereby outsiders shame businesses for human rights impacts – to ‘knowing and showing’ – where businesses themselves understand and deal with their human rights impacts – showing what actions they are taking. However, banks are largely opposed to such a level of transparency, often glossing over any responsibility to ‘account for’ what actions they take publicly, beyond publishing their policies, sometimes citing regulatory rules or client confidentiality as a reason for not doing so.[9]

Client confidentiality plays a dominant role in banks’ reasons for not disclosing their human rights performance. The DBA states that all of the commitments of the banks are subject to law, and disclosure of banks’ actions in pursuance of the DBA’s provisions is limited by client confidentiality and banks’ internal policies (article 14.8(a)). It also states that banks should engage in being as transparent as possible and that the parties should discuss options for greater transparency (article 6.10).

The first and only public output of the DBA to date was legal advice on what forms of information banks could share with the CSOs and the public. It did not limit itself to law, including provisions of loan agreements that banks enter into and market practice. It concluded that individual client information cannot be discussed unless there is the consent of the client, this information is released in compliance with a statutory obligation of disclosure or it is made anonymous. This is likely to significantly impact what banks can ‘know and show’ in the course of their activities and in their reports under the DBA.

The future of the DBA

In this blog, I have focussed on how the DBA may help bridge the current deficit between how banks have traditionally sought to interpret the UNGPs in relation to their activities and the logics of the UNGPs themselves. To the extent the text of the DBA has bridged some of these gaps, the question remains to what purpose. Although it is too early to tell how the DBA will be implemented in practice, in my full article, which this blog is based on, I go into three roles that the DBA might play: regulation, experimentalism, and advocacy.

Regulation depends on ‘rules’ which will require a greater degree of conciseness than is in the UNGPs themselves. In those areas where there is the greatest convergence between the UNGPs and existing E&S due diligence processes, e.g., risk mitigation at the point of transaction, the DBA does have relatively precise requirements. In practice, enforcement of these requirements may, to some extent, be compromised by the DBA’s less-than-ideal enforcement apparatus, as there are some conflicts of interest between the different bodies responsible for the DBA’s implementation.[10]

Experimentalism is particularly relevant for those parts of the DBA where there is less consensus between the parties, e.g., remediation. Experimentalism is based on an iterative and reflexive cycle whereby broadly defined goals and metrics are agreed on, preliminary actions are taken, these actions are assessed against the goals and metrics, and then the goals and metrics are revised in light of lessons learned before the cycle begins again.

Advocacy refers to the DBA’s potential as possibly the only initiative in banking and human rights to result from a genuine multistakeholder consensus to advocate for the uptake of similar norms at the international level. For instance, the outcomes of the remedy working group and the exchange of best due diligence practices is expected to feed into the OECD processes on banking and human rights. This will depend on the DBA not only reaching new normative consensuses but also a) advocating for them internationally and b) demonstrating their added value in practice. While the DBA shows promise, it is yet to be seen what role it will actually play (if any) in the wider business and human rights project.                                        

[1] OECD Working Party on Responsible Business Conduct, ‘Environmental and Social Risk Due Diligence in the Financial Sector: Current Approaches and Practices’ (June 2013), (OECD Survey), p. 53.

[2] Ibid., p. 54.

[3] Ibid., p. 51.

[4] Thun Group, ‘Discussion Paper on the Implications of UN Guiding Principles 13 & 17 in a Corporate and Investment Banking Context’,(January 2017), p. 15.

[5] OECD, ‘Global Forum on Responsible Business Conduct 26-27 June 2013 Summary Report’ (2013), p. 17.

[6] OECD Survey, p. 61.

[7] Ibid, p. 52.

[8] Thun Group 2017 paper.

[9] Benjamin Thompson, ‘The Dutch Banking Sector Agreement on Human Rights: An Exercise in Regulation, Experimentation or Advocacy?’ (2018) 14(2) Utrecht Law Review 84, p.89.

[10] Ibid., p. 96.

Editor’s note: Shamistha Selvaratnam is a LLM Candidate of the Advanced Masters of European and International Human Rights Law at Leiden University in the Netherlands and a contributor to the Doing Business Right project of the Asser Institute. Prior to commencing the LLM, she worked as a business and human rights solicitor in Australia where she specialised in promoting business respect for human rights through engagement with policy, law and practice.

Introduction

This report compiles all relevant news, events and materials on Doing Business Right based on the coverage provided on our twitter feed @DoinBizRight and on various websites. You are invited to contribute to this compilation via the comments section below, feel free to add links to important cases, documents and articles we may have overlooked.

The Headlines

German court rejects KiK lawsuit

On 10 January 2019, a regional court in Dortmund, Germany rejected a lawsuit brought by four affected Pakistanis that related to the death of 262 people and injury of 32 people at a Pakistani textile factory in 2012. The factory was a key supplier to German clothing company, KiK. The case was rejected on the basis that the statute of limitations had expired, despite computer simulation evidence demonstrating that inadequate safety measures were in place at the factory at the time, including no stairs and emergency exits, as well as a lack of fire extinguishers and fire alarms. It was argued that KiK ‘knew or should have known about the structural details if, as they claim, their representatives visited the factory several times’. Read more here and here.

Canadian Supreme Court hears Nevsun appeal

On 23 January 2019, the Canadian Supreme Court heard evidence involving a lawsuit involving Nevsun Resources, a Canadian mining company, which is accused of being complicit in using forced labour by one if its sub-contractors at the Bisha mine in Eritrea. The case was initially brought in 2014 by four Eritrean miners.

In 2016, the British Colombian Supreme Court rejected Nevsun’s motion to dismiss the lawsuit, which was upheld by the British Colombian Court of Appeal in 2017. In 2018, the Canadian Supreme Court allowed Nevsun to appeal the decision of the British Colombian Court of Appeal with the trial being heard earlier this year. The Canadian Supreme Court will need to decide, inter alia, whether it has jurisdiction to hear cases involving alleged breaches of customary international law by a Canadian business involving its actions in a foreign country. Read more here.

Canada introduces bill regulating forced labour and child labour within businesses

On 13 December 2018 a private members bill was introduced in Canada titled ‘C-423 – An Act respecting the fight against certain forms of modern slavery through the imposition of certain measures and amending the Customs Tariff’ (the Bill) to regulate forced labour and child labour in businesses. The Bill requires certain entities[1] to provide the Minister with an annual modern slavery report that sets out the steps it has taken to ‘prevent and reduce the risk that forced labour or child labour is used at any step of the manufacture, production, growing, extraction or processing of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity.’ Other criteria that must be included in the report includes the entity’s policies in relation to forced labour and child labour and the training provided to employees on these areas. The Bill carries penalties for non-compliance; namely, the relevant entity may be liable of an offence punishable on summary conviction and liable to a fine of up to $250,000.

UK releases report with recommendations to improve transparency in supply chains provision of Modern Slavery Act

The Independent Review of the UK Modern Slavery Act recently released an interim report. The report notes that the UK Government’s current approach to eradicating modern slavery in supply chains through the transparency in supply chains provision ‘while a step forward, is not sufficient’. Among other things, the report recommends that the UK Government should take the following action to improve its approach to addressing modern slavery in supply chains:

• Establish an internal list of companies in scope of the transparency in supply chains provision and check with companies whether they are covered by the legislation.
• Amend the option reporting criteria against which businesses may report, so that they are mandatory criteria against which businesses must report.
• Set up a central government-run repository to which companies are required to upload their statements and that is easily accessible to the public, free of charge.
• Empower the Independent Anti-Slavery Commissioner to monitor compliance and report annually.
• Strengthen the Modern Slavery Act’s approach to tackling non-compliance with the reporting requirement, adopting a gradual approach. For example, initial warnings, fines (as a percentage of turnover), court summons and directors’ disqualification.
• Introduce sanctions gradually over the next few years so as to give businesses time to adapt to changes in the legislative requirements.
• Set up or assign an enforcement body to impose sanctions on non-compliant companies.

UN and International organisations publications and statements

• European Commission – Commission publishes draft rules to ensure investment firms and insurance distributors consider sustainability topics when advising clients
• International Labour Organization – ILO and H&M Group expand partnership
• European Commission – EU steps up engagement with Republic of Korea over labour commitments under the trade agreement
• Letter from Chair-Rapporteur of the Working Group on the issue of human rights and transnational corporations and other business enterprises to Bangladeshi Government
• OECD – Human rights is an integral part of responsible business conduct
• UN General Assembly – Guiding principles on human rights impact assessments of economic reforms: Report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of human rights, particularly economic, social and cultural rights

NGO and Law Firm publications and statements

•  Amnesty International – Destination: Occupation – Digital Tourism and Israel’s Illegal Settlements in the Occupied Palestinian Territories

• Business & Human Rights Resource Centre – From Unacceptable Risks to Shared Prosperity: Building Human Rights into Jordan & Lebanon’s Construction Sector
• Business and Human Rights Resource Centre and Human Rights Now – Human rights concerns in the Japanese apparel industry: A majority of companies fail to implement mechanisms to either prevent or address human rights abuses
• Cambodian Center for Human Rights – Briefing Note on Business and Human Rights Preventing, Mitigating and Remedying Land-Related Rights Violations in the Kingdom of Cambodia: Seven Areas for Improvement
•  CHRB Response to Brumadinho Dam Disaster – Vale Suspension from Human Rights Benchmark
• CORE’s and ICJ’s Draft Statement of Intervention in the Vedanta case
• Engineers Against Poverty – Protecting the Wages of Migrant Construction Workers Part Two: Addressing the problem in Gulf Cooperation Council countries
• Ergon Associates and Ethical Trading Initiative – Managing Risks Associated with Modern Slavery: A Good Practice Note for the Private Sector
• European Center for Constitutional and Human Rights – Regional Court in Dortmund dismisses Pakistanis’ complaint against KiK: KiK evades its legal responsibility for factory fire
• Hogan Lovells – The Australian Modern Slavery Bill: the next frontier in corporate accountability for adverse human rights impacts
• Human Rights at Sea Legal Research Programme – A UN Convention on Business and Human Rights: How it would look for the maritime sector: legal and practical implications
• Human Rights Law Centre – Nowhere to Turn: Addressing Australian corporate abuses overseas
• Human Rights Law Centre – Report highlights impunity of Australian companies linked to serious human rights violations overseas
• Human Rights Watch – Australia Starts Tackling Modern Slavery: New South Wales Adds Penalties for Offenders Under State Law
• Institute for Human Rights and Business – Top 10 Business and Human Rights Issues 2019
• International Commission of Jurists – CORE and ICJ to intervene in UK Supreme Court case
• International Corporate Accountability Roundtable – Good Business: The Economic Case for Protecting Human Rights
• International Corporate Accountability Roundtable, Frank Bold and BHR Young Researchers Summit – Good Business: The Economic Case for Protecting Human Rights
• Know The Chain – 2018 Footwear & Apparel Benchmark Findings Report
• Shift – Human rights reporting in the Canadian mining sector: Maturity trends and insights
• Shift – How to Write a More Meaningful Update Report Under the French Duty of Vigilance Law

In Court

• BBC News – Apple loses legal battle with French tax activists
• Coconuts Jakarta – Supreme Court upholds IDR 1 trillion decision against company for damages caused by forest fires
• Expatica – Sierra Leone abuse claimants lose UK court case
• FIDH – ILVA scandal: following the ECHR decision, Italy must take immediate action to end the environmental crisis
• High Court of Justice in the Queen’s Bench Division (London) – Kalma v African Minerals Limited
• Honolulu Civil Beat – Lawsuit Filed By Injured Chinese Workers Against Saipan Casino
• Reuters – Thai top court orders compensation for Myanmar workers in landmark case
•  Rights and Accountability in Development – UK Supreme Court Hears Landmark Case on Corporate Rights Violations
• Times Live – Ex-Ford Argentina executives convicted in torture case

In the News

• ABC News – Brazil's new President Jair Bolsonaro rolls back Indigenous tribe protections
• Asia Times – Thai junta takes the stench off troubled fisheries industry
• BIV – Activists file securities complaints against Vancouver miners
• Bloomberg – Shell, Eni Face $1.1 Billion Nigerian Lawsuit Over 2011 Deal
• Borden Ladner Gervais – Canada: Business And Human Rights: The Stakes Continue To Grow
• Brookings – How corporations are approaching sustainability and the Global Goals
• Business and Human Rights in Burma / Myanmar – The Vedanta Appeal, Corporate Liability and Access to Justice: Relevance for Myanmar?
• Business for Social Responsibility – Why Multilateral Human Rights Bodies and Frameworks Are Vital for Business: How Companies Can Support the International Human Rights Regime
• Business in Vancouver – B.C. firm seeks to reopen troubled Guatemalan mine
•  CBC – Top court weighs precedent-setting case of human rights breaches at Canadian mine in Eritrea
• CBC – What did Canadian mining executives know about possible human rights violations in Eritrea?
• Climate Liability News – 2018 in Climate Liability: When a Trend Became a Wave
• Delta 8.7 – Fighting Modern Slavery in Supply Chains from the Bottom Up
• EcoWatch – Indigenous Group Sues Exxon, Energy Majors Over Fracking Waste Contamination in Patagonia
• Ethical Corporation – The UK should listen to MPs and fix the holes in the Modern Slavery Act
• Fashion United – What’s next for the Bangladesh Accord? Q&A
• Financial Post – Supreme Court set to hear Nevsun Resources case on Eritrea human rights abuses
• Financial Times – Beyond the bottom line: should business put purpose before profit?
• Financial Times – We must rethink the purpose of the corporation
• Freedom United – Will Nevsun Mining be Punished for Slavery Abroad?
• Global Witness – Global Witness Welcomes Canadian Regulator Ruling on Glencore – Controlled Companies and Executies
• Hellenic Shipping News – Another Dutch ship owner faces huge fine for having beached a vessel
• HuffPost – Modern Slavery Bill Targets Canadian Imports Of Goods Made By Slaves
•  Institute for Human Rights and Business – Channelling Sir Geoffrey Chandler on the History and Future of Business and Human Rights
• International The News – Saeeda Khatoon’s story remains untold in Dortmund court
• IOL – Mining companies rake in huge profits while communities live in poverty
• Juneau Empire – Alaska Native tribes allege human rights violation over Canadian mine pollution
• Khmer Times – W&D followed law when firing workers: GMAC
•  Leigh Day – Statement by Leigh Day in relation to the settlement of the human rights claims against Gemfields Ltd
•  Moneyweb – 3 court judgments that have changed the face of mining in SA
• Open Democracy – Corporate social responsibility helps hide workers’ rights abuse until brands can quietly exit
• Open Global Rights – New business and human rights treaty takes shape
• Radio Free Asia – Chinese Railway Project in Laos Leaves Farmers in the Lurch
• Reuters – Eni, Shell knew of 'sharks' in Nigeria graft case - judge
• SOMO – Higher minimum wage in Myanmar: bad news for workers?
• The Guardian – 'Inhuman conditions': life in factory making Spice Girls T-shirts
• The Guardian – NHS rubber gloves made in Malaysian factories accused of forced labour
• The Guardian – Zambian villagers await outcome of UK mining firm's pollution case appeal
• The Jakarta Post – Environmentalists face greater risks amid development drive
• The Nation – Big Business has a New Scam: the ‘Purpose Paradigm’
• The Wall Street Journal – Glencore-Controlled Miner to Be Fined by Canadian Authorities Over Congo Ops
• Thomson Reuters Foundation – Construction companies failing to protect refugee workers in Jordan, Lebanon - study
• Times Live – Victory for environmentalists in battle over coal mine in Mpumalanga

Academic Materials

• Carsten Momsen and Mathis Schwarze – The Changing Face of Corporate Liability – New Hard Law and the Increasing Influence of Soft Law, The Official Journal of the Society for the Reform of Criminal Law
• Catie Shavin – Unlocking the Potential of the New OECD Due Diligence Guidance on Responsible Business Conduct, Business and Human Rights Journal
• Charis Kamphuis and Leah Gardner – Effectiveness Framework for Home-State Non-Judicial Grievance Mechanisms
• Cristina Narváez González and Katharine Valencia – Improving Human Rights in the Private Security Industry: Envisioning the Role of ICoCA in Latin America, Forthcoming chapter in Amissi M. Manirabona & Yenny Vega Cardenas, eds, Extractive Industries and Human Rights in an Era of Global Justice: New Ways of Resolving and Preventing Conflicts (LexisNexis, 2019)
• David Bilchitz – The Necessity for a Business and Human Rights Treaty, Business and Human Rights Journal
• David Hess – The Transparency Trap: Non-Financial Disclosure and the Responsibility of Business to Respect Human Rights, American Business Law Journal
•  James Gathii and Sergio Puig – Introduction to the Symposium on Investor Responsibility: The Next Frontier in International Investment Law, American Journal of International Law
•  Kai Ambos and Carsten Momsen – Introduction: Human Rights Compliance and Corporate Criminal Liability, The Official Journal of the Society for the Reform of Criminal Law
• Mark Pieth – Corporate Compliance and Human Rights, Criminal Law Forum
• Marya Farah and Maha Abdallah – Security, Business and Human Rights in the Occupied Palestinian Territory, Business and Human Rights Journal
• Mavluda Sattorova – Investor Responsibilities from a Host State Perspective: Qualitative Data and Proposals for Treaty Reform, American Journal of International Law

Blogs           

Asser Institute Doing Business Right Blog

• Asser Institute – Modern Slavery in our backyard: Dutch shipbuilders, Polish shipyards and North Korean Slaves
• Shamistha Selvaratnam – Global Modern Slavery Developments (Part III): Other Modern Slavery Developments
• Shamistha Selvaratnam – Global Modern Slavery Developments (Part II): A Review of the New Australian Modern Slavery Act

Others

•  Aaron Halegua – Labour exploitation in Saipan (again): what difference does 20 years make?, Business and Human Rights Resource Centre

• Amy Sinclair and Justine Nolan – The Australian Modern Slavery Act 2018 – will it live up to expectations?, Business and Human Rights Resource Centre
• Carlos Lopez – The UK Supreme Court considers whether parent company Vedanta has a duty of care and so may be held legally responsible for the harm caused by its Zambian subsidiary, Opinio Juris
• Diane Desierto – Are “Transparency” Procedures and Local Community “Consultations” Enough? A Human Rights “Feedback Loop” to International Economic Law Reforms of 2018, EJIL: Talk!
• Elsa Savourey – France's law on the corporate duty of vigilance: process, pedagogy and pragmatism as the way forward, Business and Human Rights Resource Centre
• Flora Sapio – Flora Sapio on the Zero Draft of a Legally Binding Instrument to regulate the activities of transnational corporations and other business enterprise (Article 2, Statement of Purpose), Law at the End of the Day
• Gabrielle Holly – Access to Remedy Under the UNGPs: Vedanta and the Expansion of Parent Company Liability, EJIL: Talk!
•  Irene Pietropaoli and Phil Bloomer – Governments can help make business more diligent on human rights, Business and Human Rights Resource Centre
• Joylon Ford – Can consumers and market actors ‘regulate’ corporate reporting on Modern Slavery risk? , Business and Human Rights Resource Centre
• Julia Dehm – Dirty deeds: how to stop Australian miners abroad being linked to death and destruction, The Conversation
• Kate Nicholl, Miriam Wilheim and Vikram Bhakoo – Almost every brand of tuna on supermarket shelves shows why modern slavery laws are needed, The Conversation
• Louise Chappell – The spotlight shifts to gender, business and human rights, Business and Human Rights Resource Centre
• Måns Carlsson-Sweeny – Modern slavery is more than an ‘ethical issue’ to investors, Business and Human Rights Resource Centre
• Maysa Zorob – New business and human rights treaty takes shape, Business and Human Rights Resource Centre
• Nadia Bernaz – Companies Operating in a Conflict or Post-Conflict Country: Exercise Leverage or Stand Ready for Litigation, Rights as Usual
•  Nicholas Bueno – The Swiss Responsible Business Initiative and its Counter-Proposal: Texts and Current Developments, Cambridge Core Blog
• Paul Redmond – At last, Australia has a Modern Slavery Act. Here’s what you’ll need to know, The Conversation
• Virginie Rouas – Access to justice and the new French Act on the duty of care: main opportunities and challenges for plaintiffs, Cambridge Core Blog

Call for Papers and Abstracts

•  Call for Papers – Global Business and Human Rights Scholars Association 5th Annual Conference 12-13 September 2019 (abstracts due 1 March 2019)

• Call for Blogs –Business and Human Rights Journal Blog – Cambridge University

Upcoming Events

• 13-14 February 2019 – 2019 OECD Forum on Due Diligence Guidance in the Garment and Footwear Sector – Paris, France
• 20 February 2019 – International law in the vegetables department: the Swedish boycott of conflict tomatoes – Asser Institute, The Hague, The Netherlands
• 25 March 2019 – Is Corporate Accountability Possible in Capitalism? – British Institute of International and Comparative Law, London, England
• 1 April 2019 – Workshop on giving SMEs the right tools & support to respect human rights – International Organisation of Employers, Madrid, Spain
• 2 April 2019 – Workshop for Employers’ Organisations on Business & Human Rights – International Organisation of Employers, Madrid, Spain
• 3 April 2019 – International Conference on Business & Human Rights – International Organisation of Employers & Confederación Española de Organizaciones Empresariales, Madrid, Spain
• 11-12 April 2019 – Business & Human Rights Young Researchers Summit – St. Gallen, Switzerland
• 22-26 July 2019 – International Summer Course Human Rights Law in Context (special focus on business and human rights) – Centre for Human Rights Erlangen-Nürnberg (CHREN) in cooperation with the European Center for Constitutional and Human Rights (ECCHR), Nuremberg, Germany
• 12-13 September 2019 – Global Business and Human Rights Scholars Association 5th Annual Conference – University of Essex, Colchester, England

[1] An ‘entity’ is defined as a corporation or a trust, partnership or other unincorporated organisation that: (a) is listed on a stock exchange in Canada; (b) has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years: (i) it has at least $20 million in assets, (ii) it has generated at least $40 million in revenue, (iii) it employs an average of at least 250 employees.

Editor's note: Enrico Partiti is Assistant Professor of Transnational Regulation and Governance at Tilburg University and Associate Fellow at the Asser Institute. His expertise centres on European and international economic law, sustainability and supply chain regulation. In particular, he studies how private standard-setters and corporations regulate globally sustainability and human rights 

Upcoming Event: Fighting global deforestation through due diligence: towards an EU regulation on forest and ecosystem risk commodities? - 4 November 2020 - 16:00 (CET) - Register Here!

The recent vote in the Environment, Public Health and Food Safety (ENVI) Committee of the European Parliament on binding legislation to stop EU-driven global deforestation is a watershed moment in the global fight against deforestation, ecosystem conversion and associated human rights violations. The ENVI Committee report, that will soon be voted by the plenary, requests the Commission (as provided in Art. 225 TFEU) to table a legislative proposal for a measure disciplining the placing on the EU market of products associated to forest and ecosystem conversion and degradation, as well as violations of indigenous communities’ human rights. The Parliament’s initiative takes place in a policy context increasingly concerned with deforestation, in the framework of a Commission Communication on stepping up EU action to protect and restore the world’s forests which left a door open for legislative intervention. 

The proposed measure would aim to severe the economic link between demand of agricultural commodities, especially by large consumers markets, and negative environmental impacts - including on climate change. Beef, soy and palm oil alone are responsible for 80% of tropical deforestation, and consequent CO2 emissions. In 2014, EU demand was responsible for 41% of global imports of beef, 25% of palm oil and 15% of soy, as well as large shares of other commodities at high risk for forests and ecosystems such as such as maize (30%), cocoa (80%), coffee (60%), and rubber (25%). Protecting just forests is not sufficient, as it risks to displace conversion to other non-forests ecosystems such as the Brazilian cerrado. In light of their negative impact on both forests and other natural ecosystems, such commodities have been labeled as forest and ecosystem risks commodities (FERCs).

The Parliament motion lays down a rather detailed overview of a WTO law compliant measure that the Commission shall propose and that builds upon the previous EU experience in regulating placing on the EU market of agricultural products such as timber and biofuel crops. However, it goes beyond establishing a requirement of legality of product origin such as under the EU Timber Regulation. Instead, it would require that only FERCs and derived products that do not originate from land obtained via the conversion of natural forests or other natural ecosystems, do not originate from natural forests and natural ecosystems undergoing degradation, and are not produced in, or linked to, violations of human rights can be placed on the EU market. The obligation would apply to economic operators placing on the market commodities and derived products regardless of their EU or non-EU origin. This obligation of result would be operationalised through an obligation of conduct for economic operators placing covered products on the EU market, i.e. they would have to exercise due diligence in line with the human rights due diligence process laid down in the United Nations Guiding Principles on Business and Human Rights (UNGPs). A 2018 feasibility study indicated that mandatory due diligence centred on deforestation criteria would generate the highest impact among all possible regulatory and non-regulatory options.

The alignment of due diligence with the UNGPs represents a notable improvement from the requirements in the EUTR that are limited to performing a risk assessment in view to gather information about timber origin and assessing and mitigating risks of non-compliance. The proposed measure would instead include all relevant steps in human rights due diligence including involvement of affected stakeholders at all relevant moments in the definition and implementation of due diligence, reporting to the public and to enforcement authorities, ensure remediation and establish grievance mechanisms to improve accountability and access to remedy. The proposal in its current draft also contains strict enforcement and sanction provisions building on the national enforcement structure currently in place under the EUTR. As under the EUTR, enforcement will thus be determined by the practices of enforcement authorities at the Member State level. Civil society monitoring would be strengthened as individuals, NGOs and undertakings are given the possibility to challenge non-compliance before national judicial and administrative authorities. Sanctions for non-compliance would include fines, seizure of products, suspension of authorisation to place products on the internal market, exclusion from public procurement and criminal penalties for individuals. The proposal would also establish civil liability and, interestingly, it clarifies a vexed question about the relation between due diligence and liability. It notes that, while operators remain jointly and severally liable for human rights and environmental harm which they caused or contributed to, for harm to which they are directly linked, proper exercise of due diligence would lead to a discharge of liability. As the Regulation would also apply to ecosystem conversion taking place in the EU, a potential tension with the system of liability under the Environmental Liability Directive may arise.

Due diligence will have to focus on specific environmental and social criteria. This measure can therefore be seen as a sector-specific or risk-specific add-up to a future across-the-board human rights due diligence Directive. Notably, the environmental and social criteria against which due diligence is performed go beyond legality of land conversion, testifying to the awareness of the impossibility to arrest ecosystem destruction where countries willingly relax the enforcement of land-use regulations to favour agribusiness. A zero gross deforestation approach is adopted that allows placing on the EU market only FERCs and derived products that originate from areas that have not lost their status as forests and natural ecosystems, under the definitions that will be set forth in the measure, at a designated cut-off date. In addition, covered commodities shall not be harvested, extracted or produced from land obtained or used in violation of human rights and especially indigenous communities traditional land-use rights, free prior and informed consent and access to water. The operationalisation of due diligence obligations would require economic operators to map the entire value chain in question, and acquire information about the status of land of origin, including possible presence of formal and customary right, as well as human rights violations. Operators should ensure full traceability and, where needed, segregation to ensure that only compliant products are traded.

Extending due diligence responsibility to conversion clarifies the close link between human rights violations and ecosystem conversion. Apart from the clear connection between ecosystem conversion and degradation on the one hand, and human rights violations especially suffered by indigenous communities on the other, considerable human rights impacts originate from environmental harm. It is also well established that climate change, to which deforestation and ecosystem conversion greatly contribute, detrimentally affects the enjoyment of various internationally recognised human right. The proposal is also in line with various soft law instruments linking together social and environmental harm in the context of agricultural production, such as the OECD/FAO Guidance on Responsible Agriculture Supply Chains - that includes various social and environmental impacts including deforestation and conversion as part of the expected risk assessment that companies should undertake. Also one of the most high-profile voluntary pledges entered into by the industry together with other stakeholders, the UN New York Declaration on Forests, establishes a clear link between conversion of forests and ecosystems and human rights violations.

The proposal suggested by the European Parliament represents a strong starting point for a legislative process on a regulatory measure disciplining the placing on the EU market of products associated with forest and ecosystem conversion and degradation, as well as human rights violations. The clarification of the environmental component of human rights due diligence is particularly relevant not just as it makes clear what are the expected boundaries of human rights due diligence. It also puts pressure on companies to design, both individually and collectively, effective means to ensure that their supply chains are not associated to detrimental impact, and forces them to step up their so far voluntary and limited efforts towards deforestation-free value chains.