Donald Robertson, Partner, +61 9225 5523, donald.robertson@hsf.com

Alex Newton, Consultant, +61 9225 5254, alex.newton@hsf.com

19 APRIL 2016

WHAT DOES IT MEAN FOR MY COMPANY?

BUSINESS AND HUMAN RIGHTS

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OVERVIEW

• The economic context: Globalisation 2.0

• A principled approach: Guiding Principles on Business and Human Rights

• Sources of law or rules of law

• What does this mean for me/my company?

• What steps should my company take?

GLOBALISATION 2.0

THE ECONOMIC CONTEXT

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ECONOMIC CONTEXT & GLOBALISATION

• Corporations make up 50 of the top 100 economies in the world today – significant

potential to impact human rights.

• Complex array of “rules of law” and state law calling for a nuanced response from

the corporate world.

• Australia as an intertwined economy:

– new forms of globalisation – competition in tasks not goods.

– global value chains: “factory-less products”?

– clusters: the A-P region is a cluster, factory economies/headquarter economies.

– mega-regional trade deals a new form of economic constitution.

– new paradigms of contract: relational vs. discrete contracting.

– corporate social responsibility issues being built into the institutions.

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THE ‘GREAT UNBUNDLING’

Globalisation 2.0: the ‘great unbundling’

Baldwin, 2006

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A GLOBAL VALUE CHAIN IN ACTION

GUIDING PRINCIPLES ON BUSINESS AND HUMAN RIGHTS

A PRINCIPLED APPROACH

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GUIDING PRINCIPLES ON BUSINESS & HUMAN RIGHTS

Background

• The UN Norms on the Responsibilities of Transnational Corporations 2003:

intended to be binding?

• The UN Special Representative (John Ruggie): consultation.

• UN Guiding Principles on Business and Human Rights.

– unanimously endorsed by the UN Human Rights Council in 2011.

• A principled rather than prescriptive approach.

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THE UNGP FRAMEWORK: PROTECT, RESPECT, REMEDY

States have a duty to protect

• Against human rights abuses within their territory and/or jurisdiction by third parties.

• Requires states to investigate, punish and redress abuses through effective

policies, legislation, regulation and adjudication.

Corporations have a responsibility to respect human rights

• Avoid infringing on human rights of others and address adverse human rights impacts.

States must take appropriate action to ensure there is a remedy for a breach

• Through judicial, administrative, legislative or other appropriate means ensure that, when a

breach of human rights occurs within their territory and/or jurisdiction, those affected have

access to an effective remedy.

• Grievance mechanisms: state-based (judicial and non-judicial); non state-based.

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The Guiding Principles

• apply to all states and all companies.

• confirm business’ capacity to impact on all human rights.

• clarify that human rights cannot be offset, ie doing good in one place cannot

compensate for doing harm elsewhere.

• require the meaningful engagement of all sectors in respecting human rights.

• do not create any new international law obligations for states or business.

• do not undermine or limit any existing legal obligations.

KEY FEATURES OF THE GUIDING PRINCIPLES

SOURCES OF LAW OR RULES OF LAW

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• Corporations Act 2001 (Cth).

– disclosure obligations (not always labelled “human rights”).

• Privacy Act 1988 (Cth).

• Criminal Code Act 1995 (Cth): Part 2.5 extends liability for all offences within the

Act to corporations.

• anti-discrimination legislation (sex, age, race, disability).

• employment legislation.

• anti-corruption provisions.

DOMESTIC LAWS: SOME EXAMPLES

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• Bribery Act 2010 (UK)

• Modern Slavery Act 2015 (UK).

• Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (US) relating

to conflict minerals.

• Alien Tort Claims Act 1789 (US): impact of SCOTUS in Kiobel:

– presumption against extraterritorial application of US laws;

– unless ATS claims “touch upon and concern” US territory sufficiently to displace

that presumption.

• International criminal law: currently only company officials (not entities) can be

prosecuted.

FOREIGN/TRANSNATIONAL

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Standards: the role of rules of law

• OECD Guidelines for Multinational Enterprises 2011.

• UN Global Compact.

• ISO Standards 26000 – Guidance on social responsibility.

• Sector specific initiatives

– Equator Principles (banking and finance)

– Extractive Industries Transparency Initiative (extractives)

– Electronics Industry Citizenship Coalition (electronics and ICT)

• Regional initiatives:

– European Commission Guides

– Regional action plans.

RULES OF LAW APPLY?

WHAT DOES THIS MEAN FOR ME / MY COMPANY

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Non-legal issues

• Reputation: impact of social media,

24-hour news cycle

• Financial issues: shareholder

activism, divestment, costs to rectify

Legal Issues

• Domestic liability.

• Extra-territorial liability:

– through which countries does your

global value chain wind?

• Corporate complicity in human rights

violations:

– the role of corporate culture?

• Due diligence: not just what affects

the interests of the company but what

affects the interests of others.

– ongoing audit responsibilities.

SOME IMPLICATIONS

Human rights is not just a matter of

public, community or government

relationships.

The core issue is a legal issue.

WHAT STEPS SHOULD A COMPANY TAKE?

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• Develop a human rights policy or statement.

• Undertake human rights due diligence. This includes integrating and acting upon

the findings, tracking responses, and communicating how impacts are addressed. – Due diligence now looks not just to the interests of the company but of third parties.

• Ensure adequate access to remedy within the organisation – for example, through

an operational level grievance mechanism. – effectiveness criteria: legitimate, accessible, predictable, equitable, transparent, rights compatible, a source of

continuous learning, and based on engagement/dialogue.

• When a conflict arises between domestic laws and international law, business

should comply with the principles of internationally recognized human rights. – a peremptory norm of international law (takes precedence over other laws).

• Treat the risk of causing or contributing to gross human rights abuses as a legal

compliance issue wherever you operate.

HOW A COMPANY CAN BE MORE PRO-ACTIVE

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Negatives

• A human rights policy that is not

followed lays out the framework for

how liability is to be established.

• A human rights policy could give rise

to the expectation, or is the adoption,

of a duty of care. However:

– a duty of care most probably

already exists in some form.

• Cost:

– No excuse.

Positives

• A human rights policy may go towards

establishing the existence of a

corporate culture supporting human

rights protection.

• Will assist in refuting liability for human

rights offences:

– shows that the corporation has an

intention to respect human rights

and provides a framework for doing

so.

A HUMAN RIGHTS POLICY

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Issue Risk Benefit

May uncover existing or

potential breaches of human

rights.

Knowledge of a breach

increases obligation to act.

Breach can be prevented or

addressed asap.

In legal proceedings,

corporate intention may

arguably be determined by

evidence of a ‘corporate

culture’ of compliance with

human rights.

1. Lack of human rights DD

may support corporate

liability for offences.

2. DD will not automatically

and fully absolve a

company from liability for

causing or contributing to

human rights abuses.

Human rights DD may refute

corporate liability for

offences.

THE SPECIAL ROLE OF DUE DILIGENCE

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• Bank A is the part-financier of a cocoa plantation complex in country X.

• The cocoa plantation has been implicated in child labour, food shortages and

forced evictions of hundreds of families. The loan by Bank A, three years earlier,

took place amid what could be described as a land rights crisis in country X.

• During the three years since issuing the loan, Bank A had many warnings that the

cocoa plantation was involved in human rights violations and ‘land grabs’.

• Bank A has only recently ended its relationship with the cocoa plantation, but has

retained the profits from the deal.

• Affected communities are calling for Bank A to return its profits to them, noting its

initial and ongoing due diligence failure, and their ongoing dispossession from

their land.

CASE STUDY

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The contents of this publication, current at the date of publication set out in this document, are for reference purposes only. They do not constitute legal advice and should

not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.

Herbert Smith Freehills LLP and its affiliated and subsidiary businesses and firms and Herbert Smith Freehills, an Australian Partnership, are separate member firms of the

international legal practice known as Herbert Smith Freehills.

© Herbert Smith Freehills 2016

SPEAKERS

Donald Robertson

Direct +61 2 9225 5523

Mobile +61 414 275 523

Email donald.robertson@hsf.com

Donald is a Partner in the Disputes group of Herbert

Smith Freehills.

He is Adjunct Professor of Law at the University of

Sydney Law School and a Fellow of the Australian

Academy of Law.

Alex Newton

Direct +61 2 9225 5254

Mobile +61 402 322 276

Email alex.newton@hsf.com

Alex is a Consultant in the Disputes group of Herbert

Smith Freehills, in the field of human rights law.

She is an Adjunct Lecturer in Business and Human

Rights in ANU’s College of Law.