Business and Human Rights Legislation
A Synopsis of Chapter 2, “Legal Risk” (Part II)
The Grand Experiment
As voluntary human rights standards seep into commercial disputes, governments across the globe have adopted a series of measures to encourage or mandate business respect for human rights. We are in the midst of a grand experiment as to how legislation can best incentivize companies to address human rights risks throughout their global value chains. Such standards are animated by the Guiding Principles — indeed, they sometimes expressly elevate those and similar standards into law — or draw on analogous concepts, including involvement, due diligence, disclosure, and remedy. There are four main types of legislation being adopted by home states to encourage extraterritorial corporate respect for human rights: disclosure requirements, due diligence laws, criminal liability and sanctions, and administrative oversight mechanisms.
Disclosure Requirements
Disclosure requirements build on the securities law model to encourage effective human rights risk management through market pressure. Over the last few years, corporate human rights disclosure legislation has proliferated across jurisdictions. While the scope of such legislation differs, the parameters are shared: it imposes requirements on companies of a certain size to issue annual statements detailing their specific human rights risks and the measures they are undertaking to address them. Notable examples include the U.K. Modern Slavery Act, the U.K. Companies Act, the California Transparency in Supply Chains Act of 2010, and the Non-Financial Reporting Directive of the European Union (the “EU”). Similar laws have also been put forward in Canada, Australia, and Hong Kong.
Disclosure legislation tracks and reinforces the expectations of voluntary standards with the risk of regulatory sanction. But that risk is generally limited. A company can comply with the legislation by stating that it does nothing. And failure to comply may not itself be legally costly. The primary legal risk companies face related to disclosure laws is liability for misrepresentation. Companies must be ready to prove the truth of their disclosures and must be careful not to create liability for the company or for directors and officers with false or overbroad representations. Such disclosure laws thus reinforce the litigation risks discussed above.
Human Rights Due Diligence Requirements
A second form of business and human rights legislation closely tracks the structure of the Guiding Principles. Such laws extend beyond disclosure to mandate human rights due diligence to identify human rights risks and the adoption of specific measures to address those risks. Mandatory due diligence laws are rarer than disclosure requirements and generally of more limited scope. But they are gaining momentum in the wake of legislation passed in France and negotiations around the Zero Draft. Notable examples include: French Loi relative au devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre; the Swiss Responsible Business Initiative; the Dutch Child Labor Due Diligence Law; and the US Federal Acquisition Regulation.
Given that many of these laws stipulate an explicit duty for parent companies to establish due diligence procedures that extend to the operations of their subsidiaries and suppliers, they arguably establish a duty and standard of care owed by parent companies to rights-holders affected by subsidiary and supplier operations. This duty can be used to ground civil law claims against parent companies for lapses in due diligence that lead to adverse human rights impacts. The boundaries of both duty and standard are unsettled. Nonetheless, the parameters will need to be treated as justiciable if they are to have meaningful effect.
Oversight Mechanisms
A more uncertain trend in terms of business risk is the creation of national administrative and quasi-administrative oversight mechanisms to address complaints related to extraterritorial corporate human rights impacts and governance. These mechanisms are few, and their remedial authority in most cases is limited to declaratory relief. Nonetheless, their findings can interact with the litigation trends, reinforcing risks related to negligent human rights risk management.
The most well-known of these are National Contact Points for Responsible Business Conduct (“NCPs”) hear complaints and provide a mediation platform to resolve cases of alleged non-observance of the OECD Guidelines for Multinational Enterprises, whose human rights chapter incorporates the Guiding Principles. Canada has recently gone a step further with the Ombudsperson for Responsible Enterprise. Though their exact mandates and jurisdiction vary, each of these mechanisms operate as a non-judicial venue for complaints regarding corporate compliance with human rights governance expectations. That judgment has the potential to ground material and far-reaching legal risk, extending to direct or derivative criminal sanctions.
Criminal Liability and Sanctions
In addition to corporate human rights governance legislation, companies are increasingly subject to sanctions and criminal liability for involvement in specific human rights abuses. The William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008[1] prohibits a variety of trafficking-related acts, including forced labour, slavery, human trafficking, and child labour, as well as for aiding the commission of these acts or conspiring to commit them. In addition, the Act makes illegal “knowingly benefitting” — financially or otherwise — from any of these wrongs.[2] A related trend permits sanctions against non-nationals that have perpetrated or are complicit in human rights abuses abroad.
International Treaty
The developments in legislation, litigation, and international law are likely to broaden and deepen in light of the Zero Draft. The proposed language includes many of the concepts and terms used in the Guiding Principles, including the essential elements of human rights due diligence, remedial mechanisms, and the distinction between responsibility for a company’s own activities and those to which they are directly linked through some business relationship.
The Zero Draft offers, in many ways, a practical and reasonable path forward to advance corporate human rights governance. The focus on national jurisdiction exercised by states to mandate human rights due diligence coheres well with existing law and the specific institutional constraints of business. But the Zero Draft also signals a vertigo-inspiring transposition of undefined terms into international law. Indeed, as we discuss in the next chapter, “human rights impact” itself has only a hazy meaning when applied directly to private actors. So too terms like “directly linked”, which appear to have been copied and pasted from the Guiding Principles.
Critical concepts to frame serious liability thus rest, at the moment, on tenuous foundations. Of course, the law is accustomed to addressing such challenges. The tools it employs, however, are legal. For the Zero Draft to have legal meaning, jurists and legislators will need to untangle the voluntary provenance of its terms from their legal destination to derive precise definitions with predictable effects.
The legislative trends interact with and bolster the litigation trends to weave a human rights duty and standard of care into law. But that duty and standard remain distressingly parasitic on voluntary corporate responsibility standards, which remain in critical ways vague and circular. Legislators, lawyers, and jurists will need to be far more exacting if such law is to accord with the rule of law. It is to advance a method for such scrutiny that the rest of this book is devoted.
[1] 18 U.S.C. § 1595 (2008), certain provisions subsequently amended by the Trafficking Victims Protection Reauthorization Act of 2013, 18 U.S.C. § 1595 (2013).
[2] Ibid.
