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DomesticLawsandBusiness&HumanRightsApril2017
SilkRoadReport
JusticeforIranSilkRoadReport:April2017
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SilkRoadReport
DomesticLawsandBusiness&HumanRights
JusticeforIran
April2017
Email:[email protected]
Website:www.justiceforiran.org
Copyright©JusticeforIran2017
Reproductionofanyorallpartsofthisdocumentispermissibleonlywithpropercitation.
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TableofContents
ABOUTTHESILKROADPROJECT........................................................................................3
ABOUTTHEREPORT...........................................................................................................4
I. INTRODUCTION...........................................................................................................5
II. CANADA.....................................................................................................................5
III. FRANCE.....................................................................................................................8
IV. GERMANY...............................................................................................................13
V. ITALY........................................................................................................................15
VI. SPAIN......................................................................................................................16
VII. SWITZERLAND........................................................................................................18
VIII. UNITEDKINGDOM................................................................................................18
IX. UNITEDSTATES.......................................................................................................20
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AboutTheSilkRoadProjectTheSilkRoadwasanancientnetworkoftraderoutesthatwereforcenturiescentral
to cultural interaction through regions of the Asian continent connecting the East
andWest, fromChina to theMediterranean Sea. Tradeon the Silk Roadplayed a
significant role in the development of the civilizations of China, the Subcontinent,
Persia, Europe, the Horn of Africa and Arabia, opening long-distance political and
economicrelationsbetweenthecivilizations.
The Silk Roadproject aims to promote accountability andprotect human rights in
thecontextofIran’srapidreturntotheworldmarketsafterthe2015NuclearDeal.1
ThroughpublishingreportsonbusinessandhumanrightsinIran,thisprojectintends
to increase awareness among advocates of human rights, particularly lawyers and
civil societyactivists,andaccountability inbusinessandcorporaterelations. Italso
aimstoholdaccountablecorporateswhichareinvolvedorcomplicitinhumanright
violations,usinglegalandotheravailablemechanisms.
1TheJointComprehensivePlanofAction(JCPOA)knowncommonlyasthe Irandealor Irannucleardeal, isaninternationalagreementon thenuclearprogramof Iran reached inViennaon14 July2015between Iran, theP5+1 (the five permanent members of the United Nations Security Council—China, France, Russia, UnitedKingdom,UnitedStates—plusGermany),andtheEuropeanUnion.Undertheagreement,IranwillreceiverelieffromU.S.,EuropeanUnion,andUnitedNationsSecurityCouncilnuclear-relatedeconomicsanctions.
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AbouttheReportThisisourfourthreportfromtheSilkRoadReportserieswhichaimtoshedlighton
theunderlyingconceptsandinstrumentsaswellasmechanismsthatcanbeapplied
to specific cases of recent contracts and agreements between multinational
corporationsandIraniancompanies,someofwhicharecloselylinkedtoorpartially
ownedbyhumanrightsviolators. Inthisreport,wewillbrieflyexplorethegeneral
principlesapplicableinanumberofcountries’domesticlawsinrelationtoclaimsof
violationofhumanrightsbytheirnationalcompaniesabroad,aswellastheirefforts
toadoptNationalActionPlansfor implementationoftheUNGuidingPrincipleson
BusinessandHumanRightsandOECDGuidelines.Itshouldbenotedthatthisreport
isnotintendedtoprovideanexhaustivereviewoftheapplicablelawsbuttoprovide
an overview of certain aspects of this rapidly evolving area of the law in Canada,
France, Germany, Italy, Spain, Switzerland, the United Kingdom and the United
States.
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I. IntroductionDomestic laws generally do not cover the issue of business and human rights,
althoughsomeEUMemberStatesareintheprocessofdevelopingorhavelaunched
nationalactionplansfortheimplementationoftheUNGuidingPrinciples.2However
severalexistinglegislationsintheareaoftransnationalcorruption,tortsorworkers
health and security could be of use to the extent that they regulate activities of
transnationalcorporationsandotherbusinessenterprises.Thissectionexaminesthe
nationallawsofanumberofcountriesincludingsomeEUmemberstatesinrelation
tobusinessandhumanrights.
II. Canada
IntheCanadiancontext,therehavebeenatleasttwofailedattemptstolegislateon
theissueofCSR,namelyBillC-584:TheCorporateSocialResponsibilityofExtractive
CorporationsOutsideCanadaAct(2013)andBillC-300:TheCorporateAccountability
ofMining,OilandGasCorporationsinDevelopingCountriesAct(2009).
In the extractives industries such as mining, oil, and gas, the country’s largest
industrial sectors, recent debates are focused on the creation of an ad hoc
ombudspersontoinvestigateCanadiancompaniesimplicatedinwrongdoingabroad3
tocomplementthelatestCorporateSocialResponsibilityStrategy.4
2AccordingtoareportpublishedbytheCouncilofEurope,asofApril2016nineEuropeancountrieshavealreadypublishedNAPsonbusinessandhumanrights:Finland,Denmark,Italy,Lithuania,theNetherlands,Norway,Spain,Sweden,andtheUnitedKingdom.NinefurtherNAPsareonthewayinAzerbaijan,Belgium,CzechRepublic,Germany,Greece,Ireland,Portugal,SloveniaandSwitzerland:http://www.coe.int/ca/web/commissioner/-/business-enterprises-begin-to-recognise-their-human-rights-responsibilities3https://www.hilltimes.com/2016/11/09/feds-seriously-considering-mining-ombudsman-says-canadas-corporate-social-responsibility-envoy/866914http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/other-autre/csr-strat-rse.aspx?lang=eng
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However, various provincial legislative schemes impose specific personal liabilities
ondirectors, thereby creating incentives for directors tomonitor legal compliance
withapplicablelaws,includinghumanrightslaws.Incommonlaw,directors’duties
encompass both a duty to serve the best interest of the corporation, including
ensuringthereiscompliancewithalllegalobligationsapplyingtoacompany,andto
avoidconduct that isoppressive to the“reasonableexpectations”of stakeholders.
Suchanexpectationmaybethatacorporationiscompliantwithapplicablehuman
rightslegislation.
Atthefederallevel,sections217and217.1oftheCriminalCode,forexample,apply
to and extend liability to officers with directing capacity within a corporation,
creatinga legalduty toperform their functions “if anomission todo theact isor
maybedangeroustolife”and“totakereasonablestepstopreventbodilyharmto
thatperson,oranyotherperson,arisingfromthatworkortask.”Theseprovisions
have been interpreted as establishing a legal duty for a business to conduct due
diligence to protect against the risk of bodily harm of employees and the public,
includingforinstanceenvironmentaldamages.
Withrespecttooffencesofnegligencecommittedbyanorganization,s.22.1ofthe
CriminalCodesetsoutatwo-steptesttoestablishtheguiltofanorganization.The
firststeprequiresproofthata“representative”ofthatorganizationisapartytothe
offence.A“representative”, inrespectofanorganization, isdefinedas“adirector,
partner,employee,member,agentorcontractoroftheorganization”.Thisdefinition
extends liability of a company beyond the national jurisdictional borders which it
occupies and includes those in which it carries its operations. The second step
requiresproofthata“seniorofficer”withintheorganizationhasdepartedmarkedly
from a standard of care that, in the circumstances, could have reasonably been
expectedtopreventarepresentativeoftheorganizationfrombeingapartytothe
offence.
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It isalsoworthnotingthatCanadiancourtshavetraditionallyappliedtheForumof
Necessitydoctrine to assume jurisdictionover claimsagainstCanadian companies’
activities abroad inexceptional cases,where there isnoother forum inwhich the
plaintiffcanreasonablyseekrelief.5Examplesofsituationsinwhichthedoctrinehas
relevance include, but are not limited to, the breakdown of diplomatic or
commercialrelationswithaforeignState;theneedtoprotectapoliticalrefugee;or
theexistenceofaseriousphysicalthreatifthedebateweretobeundertakenbefore
theforeigncourt.
CaseStudy:GizeYebeyoAraya,KeseteTekleEshazionandMihretabYemaneTeklev.NebsunResources6(monitorprogress)The first modern-day slavery lawsuit brought by 3 Eritrean workers before theSupremeCourtofBritishColumbiaIn November 2014, three Eritreans filed a lawsuit against Nevsun Resources inVancouver,BritishColumbia,Canada,allegingthatthecompanywascomplicitintheuseofforcedlabourbyNevsun’slocalsub-contractor,SegenConstruction(ownedbyEritrea’s ruling party), at the Bisha mine in Eritrea. Nevsun, headquartered inVancouver, has denied the allegations. This lawsuit is the first in Canada whereclaimsarebaseddirectlyonviolationsofinternationallaw.
The plaintiffs, Gize Yebeyo Araya, Kesete Tekle Fshazion and Mihretab YemaneTekle,claimthattheyworkedattheBishamineagainsttheirwillandweresubjectto“cruel, inhuman and degrading treatment”. They allege that they were forced towork long hours and lived in constant fear of threats of torture andintimidation.Nevsunhasrejectedtheallegationsas“unfounded”anddeclaredthat“theBishaMinehasadheredatall timesto internationalstandardsofgovernance,workplaceconditions,andhealthandsafety”.
5VanBredav.VillageResortsLtd.,2010ONCA84,WestVanInc.v.Daisley,2014ONCA232,Bouzariv.Bahremani,2013ONSC63376http://www.lexpert.ca/article/court-decision-to-hear-slavery-case-has-major-implications-across-industries/;http://www.canlii.org/en/bc/bcsc/doc/2016/2016bcsc1856/2016bcsc1856.html?resultIndex=3.
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InOctober2016,theSupremeCourtofBritishColombiarejectedNevsun’smotiontodismiss the lawsuit and ruled that the case should proceed in British Colombia asthereweredoubtsthattheplaintiffswouldgetafairtrialinEritrea.
III. FranceOnFebruary21,2017,aftera lengthyandcontroversialprocessofexchangesback
andforthbetweentheFrenchNationalAssemblyandSenate,Franceadoptedanew
law entitled “Act regarding the Duty of Care of Parent Companies and Ordering
Companies”7. The Bill of law was initially adopted by the National Assembly on
March30,20158,followingwhich itwasrejectedandre-adoptedunderamodified
versiontwicebytheSenate(November19,2015andOctober13,2016)andtwiceby
theNationalAssembly(March23,2016andFebruary21,2017).9
TheAct,asadoptedon21February2017,wassubsequentlychallengedbeforethe
FrenchConstitutionalCouncil.OnMarch23,2017,bydecisionNo2017-750DC,the
FrenchConstitutionalCouncilheldthattheprovisionsrelatingtotheestablishment
of a civil fine mechanism imposing a maximum penalty of 10 million euros for
companies breaching their obligations under the new duty of vigilance were
unconstitutional, given the lack of clarity in the terms used by the legislator in
definingthenewobligations.10
7Loin°399relativeaudevoirdevigilancedessociétésmèresetdesentreprisesdonneusesd’ordre:https://www.legifrance.gouv.fr/eli/loi/2017/3/27/2017-399/jo/texte.TheActintroducestwonewprovisionsunderthesectionoftheFrenchCommercialCodeconcerningFrenchlimitedcompanies(sociétésanonymes(SA))(articlesL.225-102-4andL.225-102-5oftheCommercialCode).Byreference,thesenewprovisionsalsoapplytoFrenchsimplifiedlimitedcompanies(sociétésparactionssimplifiées(SAS))andFrenchlimitedpartnerships(sociétésencommanditeparactions(SCA)).8Projetdeloirelativeaudevoirdevigilancedessociétésmeresetdesentreprisesdonneusesd’ordre:http://www.assemblee-nationale.fr/14/propositions/pion2578.asp9AllversionsoftheBillandreportsoftheJointParliamentaryCommitteetaskedwithfindingacomprimisebetweenthetwochambersareavailableat:http://www.assemblee-nationale.fr/14/dossiers/devoir_vigilance_entreprises_donneuses_ordre.asp10http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2017/2017-750-dc/decision-n-2017-750-dc-du-23-mars-2017.148843.html
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The new Act essentially imposes procedural due diligence obligations throughout
theirsupplychainsonallcompanieswithatleast5000employees(includingthose
of their direct and indirect subsidiaries) if the company holds its registered head
officeontheFrenchterritoryoratleast10000employees(includingthoseoftheir
directandindirectsubsidiaries)ifthecompanyholdsitsregisteredheadofficeonor
outside French territory. On an exceptional basis, the subsidiaries or controlled
companiesexceedingtheaforementionedthresholdsaredeemedtohavesatisfied
the above obligation. In such cases, the company controlling them, within the
meaning of article L. 233-3 of the French Commercial Code, establishes and
implementsavigilanceplanrelatingtothebusinessactivitiesofthecompanyandof
allofthesubsidiariesorcompaniescontrolledbyit.
CompaniessubjecttothenewActarerequiredtoadoptvariousmeasuresintended
to prevent any serious violations with respect to human rights and fundamental
freedoms,thehealthandsafetyofpersonsandtheenvironment,namely:
- completingariskmapintendedtoidentify,analyseandclassifyrisks;
- implementing a mechanism to regularly assess the situation of the
subsidiaries,subcontractorsorsupplierswithwhichtheyhaveanestablished
commercialrelationship,forthepurposesofriskmapping;
- carrying out any measures designed to mitigate risks or prevent serious
violations;
- establishing an alert and warning system regarding the existence or
occurrenceofrisks;and
- establishing a follow-up mechanism for measures implemented and an
assessmentproceduretoevaluatetheirefficiency.
Accordingly, theActprovides for (i) theestablishmentofa formal “VigilancePlan”
(oraduediligenceplan),including“appropriatemeasuresofreasonablevigilancein
order to identify risks and prevent serious breaches of human rights and
fundamental liberties,healthand securityofpeopleaswell asenvironment in the
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various relevant entities”, and (ii) the publication of a report on its effective
implementation,bothofwhichshouldbeincludedinthemanagementreportofthe
affectedcompanyreferredto inarticleL.225-102oftheFrenchCommercialCode.
Since an SAS is not required to issue such management report, this provision
requiresfurtherclarificationregardingSASs.
The relevant risksor infringementsmustbe identifiednotonlywith regard to the
company’s own activities but also with regard to the activities of its directly or
indirectly controlled companies, as well as the activities of subcontractors and
supplierswithwhoma commercial relationship isestablished.UnderFrench lawa
company is controlled (i)when amajority of its voting rights are held by another
company, (ii) when amajority of themembers of its administrative, executive or
supervisorybodiesareappointedbyanothercompany for twosuccessive financial
years,or(iii)whenadominantinfluenceisexertedoverthecompanybyvirtueofa
contract or the terms and conditions of its constitution (Article L.233-16 of the
FrenchCommercialCode).
TheVigilancePlanmustbeestablished from the financial periodduringwhich the
Act is published, i.e. as of the current 2017 financial period for companieswith a
financialyearendingonDecember31.Theprovisionsrelatingto(i)thereportofthe
effective implementation of the Vigilance Plan and (ii) the liability of the parent
companyapplyfromtheissuingdateofthemanagementreportrelatingtothefirst
financial period after the publication of the law, i.e. as of the issuing date of the
managementreportforthe2018financialyearforcompanieswithafinancialyear
endingonDecember31.
Intheeventofanybreachoftheobligationsunderthedutyofvigilance,threetypes
ofenforcementmeasuresmaybe soughtagainstnon-compliant companiesbefore
courtsofcompetentjurisdiction:
1) Injunctivemeasures,subjecttoapplicablepenalties.
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2) Anorderforcompensationforanyharmwhichcouldhavebeenavoidedhad
theobligationsunderthedutyofvigilancebeendulyperformed,pursuantto
theconditionssetoutinarticles1240and1241oftheFrenchCivilCode(fault
ortortbasedliability).
3) An order for the publication, public release or posting of the decision
renderedagainstthenon-compliantcompanyoranexcerptthereof.
Asmentionedearlier,anon-taxdeductiblecivilfinenotexceedingtheamountof10
millioneuros,whichcouldbeincreasedto30millionEurosincertaincases,wasalso
initially provided for but was ultimately declared unconstitutional by the French
ConstitutionalCouncil.
On the issue of standing, the Act simply states that “any person justifying of an
interest to act” can bring an action against a non-compliant company within 3
monthsfromtheformalnoticeofnon-compliance.Notethatunliketheearlieranti-
corruptionactknownasSapinII11,whichattributesthepowertoissueaninjunction
toorderthesettingofaplantothenewFrenchAnticorruptionAgency,theActdoes
notmentiontherelevantorganismresponsiblefortheissuanceofformalnoticesof
noncompliance.
GiventheAct’slackofclarityinseveralrespects,itisexpectedthatadecreebythe
French Administrative Supreme Court, the Conseil d’Etat, would supplement the
measures provided and specify the terms of development and implementation of
theVigilancePlanamongotherissues.
TheAct regarding theDuty of Care of Parent Companies andOrdering Companies
tiesinwiththeearlieranti-corporatecorruptionlawknownasSapinII,extendingits
scope to include protection against serious violations of fundamental rights and 11Loin°2016-1691du9décembre2016relativeàlatransparence,àlaluttecontrelacorruptionetàlamodernisationdelavieéconomique;https://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000033558528&categorieLien=id.Forfurtherinformationonthislaw,see:https://www.lw.com/thoughtLeadership/Frances-major-anti-CorruptionReformWhatsNextforCompaniesandTheirTopManagementorhttp://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/14-sapin-ii-law-is-france-at-the-cutting-edge-of-anti-corruption-legislation
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freedomsandthreatstothesafetyofpersonsandtheenvironment.Otherlegislative
provisionswhichaimatreducingsocial,health-relatedandenvironmentaldamages
andaddressviolationsofhuman rights committedoutsideofFranceasa resultof
director indirectactivitiesofFrenchcompaniesexist includings.5ofActn°2014-
773, Orientation and planning relating to development policy and international
solidarity, July 7, 2014; this includes measures encouraging French companies to
implement OECD Guidelines. Furthermore, on April 26, 2017, the French
government released its first National Action Plan (NAP), which includes several
measurestofacilitatethemandateoftheFrenchNationalContactPoint(NCP).12
The jurisprudential context in France is generally favourable to holding companies
liableforactscommittedoutsideoftheFrenchterritory.Forinstance,inSeptember
2005,inacaseknownasErika,France’shighestcourt(Courdecassation)uphelda
conviction of negligence and fines imposed on Total for an oil spill disaster in
internationalwatersneartheSpanishcoast.13
CaseStudy:FinancialComplicity
InNovember 2016, a criminal complaintwas filed inSherpa v. Lafarge before theTribunaldegrandeinstancedeParisbySherpaandtheECCHR(EuropeanCentreforConstitutionalandHumanRights),aswellas11complainantswhoareformerSyrianemployeesof LafargeHolcim, theFranco-Swiss cementproducer.14While the legalbasisoftheclaimiscomplicityinwarcrimesandcrimesagainsthumanityinSyria,atissue is the question of potential “financial complicity” of Lafarge in the crimescommitted by the Islamic State of Iraq and Syria (ISIS) on the basis that Lafarge
12http://www.diplomatie.gouv.fr/fr/politique-etrangere-de-la-france/droits-de-l-homme/entreprises-et-droits-de-l-homme/article/adoption-du-plan-national-d-action-pour-la-mise-en-oeuvre-des-principes13https://www.courdecassation.fr/jurisprudence_2/chambre_criminelle_578/arret_n_24143.html;https://www.legifrance.gouv.fr/affichJuriJudi.do?oldAction=rechJuriJudi&idTexte=JURITEXT000026430035&fastReqId=796592764&fastPos=114http://www.reuters.com/article/us-mideast-crisis-syria-lafarge-idUSKBN13A24Z;http://www.globalcement.com/news/itemlist/tag/Lafarge%20Syria;http://www.lemonde.fr/syrie/article/2016/11/15/l-ong-sherpa-porte-plainte-contre-lafarge-pour-financement-du-terrorisme_5031474_1618247.html;http://www.thelocal.no/20161124/norways-oil-fund-invested-in-company-with-alleged-isis-ties
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entered into financial arrangements with ISIS in order to maintain production bypayingforpasses issuedbythegroupandpurchasedrawmaterialssuchasoilandpozzalanainthecourseofitsoperationsinconflictzonesunderISIScontrol.15ThiscaseisanimportantdevelopmentandexpectedtoprovidefurtherclarificationsonlegalactionsbroughtbeforecourtsofdomesticjurisdictionagainsthumanrightsviolationscommittedbyFrenchcompaniesabroad.
IV. GermanyOn December 21, 2016, the German federal cabinet formally adopted a National
ActionPlanforimplementationoftheUNGuidingPrinciplesonBusinessandHuman
Rights.16DespiteconsiderablecampaigningandadvocacyworkonthepartofNGOs
for thesemeasures tobemade compulsory for all companies17, theActionPlan is
binding only for public companies and recommended for private companies with
over5000employees.
AsfarasGermandomestic lawisconcerned,criminalprosecutionsofcorporations
(asopposedtoindividualmanagersandexecutives)cannottakeplaceunderGerman
law.However,undertheAdministrativeOffensesAct(Ordnungswidrigkeitengesetz),
agents, representatives or board members of a corporate entity, acting in that
capacity,canbeheldfinanciallyresponsibleformonetarypenaltiesiftheyarefound
to have committed an act that results in the violation of a legal duty by the
corporate entity or intentionally or negligently omitting necessary supervisory
measuresforpreventingcriminaloffenses.Asaresult,themajorityofcurrentcases
againstcorporationsthatdonotmeettheirinternationalduediligenceobligationsat
15Forfurtherinformation,seecasereportbyECCHRandSheraathttps://www.ecchr.eu/en/business-and-human-rights/lafarge-syria.htmlandhttps://www.asso-sherpa.org/service/lafarge-sued-for-financing-isis-and-complicity-in-war-crimes-and-crimes-against-humanity-in-syria16AvailableinGermanonly:http://www.cora-netz.de/cora/wp-content/uploads/2016/12/Nationaler-Aktionsplan-Wirtschaft-und-Menschenrechte_Dtl_2016-12-21.pdf17SeeCoraNetworkasanexample:http://www.cora-netz.de/cora/
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different levelsareeithercriminalaccusationsagainst individualmanagers18ortort
claimsagainstthecompanyitself.
CaseStudy:PakistanfactoryfirevictimssuingKiK
InSeptember2012,260workersdiedinafireattheAliEnterprisestextilefactoryinKarachi, Pakistan. 32 people were injured, some critically. Many of the windowswerebarred, the factory’s emergencyexitswere lockedand thebuildinghadonlyone unobstructed exit, impeding the exit of employees who suffocated or wereburnedaliveinside.Thefactory’sbiggestclientwasKiK,aGermandiscountretailerwhichdisclosedthatitbought70%ofthetextilesproducedbythefactoryin2011.KiKhasstatedthatitwasitsbusinessthatenabledthePakistanimanufacturingfirmtogrowintoamajorcompany.KiKalsostated thatauditingcompanieswerehired to reviewsafetyandotherworkingconditionsatthefactoryonaregularbasis.KiKkneworshouldhaveknown about the working conditions, as well as construction details, such as thebarredwindows–initsCSRreports,thecompanyexplicitlyindicatedthatitssupplyfactoriesare inspectedona regularbasis. Justa fewweeksbefore the fire, ItaliancompanyRINAissuedthefactorywithanSA8000certificate,whichissupposedtoact as a guarantee of safety as well as social and environmental sustainabilitystandards.InPakistan,acriminalinvestigationintotheownerofthefactorywasdiscontinued.On13March2015,fourofthoseaffectedbythedisasterfiledacompensationclaimagainstKiKattheRegionalCourtinDortmund.MuhammadHanif,MuhammadJabbir,AbdulAzizKhanYousufZaiandSaeedaKhatoonareallmembersofBaldiaFactoryFireAssociation,anorganizationrunbythoseaffectedbythefire,andareseeking30,000euroeachincompensation.Thecaseisstillpending.On30August2016thecourtissuedaninitialdecision,assumingjurisdictionoverthematterandgrantinglegalaidtotheclaimantstocovertheircosts.Thisdecisionisa
18SeeforexamplesLahmeyerandDanzercasesbroughtbeforeGermancourtsbyECCHR:https://www.ecchr.eu/en/our_work/business-and-human-rights.html
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firststeptowardsdealingwithhumanrightsviolationsbyGermancompaniesabroadbeforeGermancourts.19
V. ItalyOn December 1, 2016, Italy released its latest National Action Plan (NAP), which
includes non-binding due diligence measures and procedures for companies
operatingdomesticallyandabroad.20
Prior to the NAPs, Legislative Decree n° 231/2001 entitled “Regulation of
administrativeliabilityoflegalentities,companiesandassociations,includingthose
without legal status”, as amended on 21 November 200721, set out a regime of
administrative liability (mainly of criminal nature) applicable to transnational
corruption-related crimes committed, namely receiving, laundering, and using
money, assets or profits of unlawful origin, committedby companies, associations
andconsortiainthecourseoftheirbusinessactivities(s.648CriminalCode).Specific
crimesforwhichacorporateentitycanbeeheldliableunderLD231arelistedunder
articles24and25andincludecybercrimesandbreachofdataprotection;criminal
conspiracy;extortionandcorruption; counterfeitof cash, treasurybondsor stamp
duties;tradefraud;corporateoffences(including:falsefinancialstatements,market
abuse and obstruction of regulators); terrorism; market abuse; manslaughter and
breachesofhealthandsafetylegislation;moneylaundering:copyrightoffences;and
obstructionofjusticeoffices.LD231appliestoallcrimesdescribedthereunderand
totheconductofaidingandabettingthecommissionofsuchcrimes.
19https://www.ecchr.eu/en/our_work/business-and-human-rights/working-conditions-in-south-asia/pakistan-kik.html;http://grundundmenschenrechtsblog.de/supply-chain-liability-the-lawsuit-by-karachi-claimants-against-retailer-kik-in-historic-perspective/20http://www.cidu.esteri.it/resource/2016/12/49117_f_NAPBHRENGFINALEDEC152017.pdf21ImplementingEuropeandirective2005/60/ECconcerningthepreventionoftheuseofthefinancialsystemtolaunderproceedsofcrimeandterroristfinancing,aswellasdirective2006/70/EC,containingimplementationmeasures.
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TheDecreeprovidesforfinancialpenaltiesaswellasmeasuresofconfiscationand
prohibition and publication of judgments rendered against the non-compliant
company.22However,thecorporateentityhasanaffirmativedefenceifitcanshow
thatithadinplaceandeffectivelyimplementedadequatemanagementsystemsand
controls.
Under Italian law, corporate wrongdoing is dealt with through a system of
administrativeoffencesandpenalties.Generally,nocriminal liabilitycanbesought
against a corporate entity. The liability of individuals, whether civil or criminal, is
completelyindependentofthecorporateentity’sliabilityandisdeterminedundera
different set of rules. A finding against a corporate entity cannot be used to
determinetheliabilityofanindividual.However,inproceedingsbroughtagainstan
individual,acourthasdiscretiontointroducetheconvictionofacorporateentity,if
relevant,asevidenceofthefindingsofthosefacts.
VI. SpainSince2012,workhasbeenongoingonthedraftingofthe“NationalPlanonBusiness
andHumanRights”,whichisatthefinalstageofprocessing,priortobeingsentto
the Council of Ministers for approval. 23 The Spanish NAP is one of the most
ambitiousones in Europe: in addition to civil recourses, it envisionsextending the
powersoftheAttorneyGeneralifsufficientevidenceexiststoestablishthataparent
companyhasbeeninvolvedinviolationsofhumanrights.24
22http://www.posteitaliane.it/resources/editoriale/pdf/En/Model231.pdf23https://business-humanrights.org/en/spain24Forfurtherinformationseehttp://forumcitoyenpourlarse.org/wp-content/uploads/2016/10/Impunite_multinationales-Europe_avance.pdf
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On24October2014,theCouncilofMinistersapprovedtheSpanishCorporateSocial
ResponsibilityStrategy,whichhasahuman rights focus.25Many largecorporations
have already put in place a CSR strategy pursuant to this model and have their
governancebodiesmonitorthestrategyofthegroupworldwide.
TheOrganicLaw5/2010of22June2010incorporatedintheSpanishCriminalCode
(CódigoPenal)establishesanexpressregulationofthecriminalliabilityofcorporate
entitiesforcrimescommittedontheirbehalfbytheirrepresentatives,defactoand
dejureadministrators,employeesand/orcontractedworkers.Corporateentitiesare
only liable for crimesexpressly applicable to themunder corporate law, including:
discoveryanddisclosureofsecrets;fraudandpunishableinsolvency;crimesrelated
to intellectual and industrial property, the market and consumers; tax fraud and
money laundering; urban planning offences and crimes against the environment;
andcorruptionoffences.LO5/2010requiresthat,inorderforacorporateentityto
be criminally liable for offences committed by its employees and/or contracted
workers, the former must have been able to commit the offence due to lack of
supervision in accordance with the specific circumstances of the case. Therefore,
corporateentitieswillnotbecriminallyliableiftheyenforceappropriatesupervision
policiesovertheiremployees,asrequiredunderthelaw.
Penalties which may be imposed on a corporate entity under LO 5/2010 include
monetary fines (calculated according to the damage caused or the revenue
obtained);dissolutionofthelegalentity;suspensionofactivitiesforatermofupto
fiveyears;closureofthepremisesandestablishmentsforatermofuptofiveyears;
temporary or indefinite prohibition from carrying out in the future any activities
which led to the crime being committed, favoured or concealed; disqualification
from obtaining subsidies and public aid, from entering into agreements with the
25http://www.lamoncloa.gob.es/lang/en/gobierno/councilministers/Paginas/2014/20141024-councilministers.aspx
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publicsectorandfromobtainingtaxorsocialsecuritybenefitsandincentivesfora
termofupto15years;andlegalinterventionforatermofuptofiveyears.
VII. SwitzerlandOnDecember9,2016,over5yearsaftertheadoptionoftheUNGuidingPrinciples
on Business and Human Rights, Switzerland finally published its implementation
strategyorNationalActionPlan.26TheSwissNAPrecognizesthattheUNGPslaythe
foundation for regulating business from a human rights perspective but explicitly
excludesanybindingmeasures forcompanies.AccordingtotheSwissCoalition for
Corporate Justice (SCCJ), the published version of the NAP represents a step
backwards compared to the draft submitted for consultation in June of this year.
Whereasmandatoryhumanrightsduediligenceforstate-ownedenterpriseswasin
thepriorversion, it isabsent in the finalNAP.Thecurrent textmerely requiresan
inventoryofCSRactivitiesofthoseenterprises.27
VIII. UnitedKingdomTheUK has created or endorsed a number of instruments thatmotivate different
aspectsofgoodcorporatebehaviourandrespectforhumanrights.Theseinclude:
• theUKBriberyActof2010where, in linewithourOECDcommitments,
provides grounds for holdingUK companies liable in theUK for acts of
briberycommittedanywhereintheworld;
• section172oftheCompaniesActof2006,whichprovidesthatdirectors
mustconsidertheimpactonthecommunityofthecompany’soperations. 26Availableat:http://konzern-initiative.ch/initiativtext/?lang=en27http://konzern-initiative.ch/switzerlands-disappointing-action-plan/?lang=en
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The Act was revised in October 2013 to ensure that directors of
companies consider human rights issues when making their annual
strategicreports;
• theModernSlaveryActof2015createsadutyoftransparencyinsupply
chains as well as reporting requirements.28 This Act requires certain
entitiesconductingallorpartoftheirbusinessactivitiesintheUKtoissue
and publish an annual statement regarding the methodology used to
controltheirsupplychaininordertodeterminetheexistenceofanyrisk
ofslaverypracticesorhumantrafficking.Anybreachofthisobligationis
subjecttoanunlimitedfine;
• theDeclarationonFundamentalPrinciplesandRightsatWorkadoptedin
1998 and the 8 core ILO Conventions ratified by the UK on labour
standards;
• the OECD Guidelines for Multinational Enterprises and establishing a
NationalContactPoint.
The UK government also exercises controls on exports that could cause harm,
including strategic products such as arms and surveillance equipment through the
export licensing system. All export licence applications are rigorously assessed
against the Consolidated EU and National Arms Export Licensing Criteria. These
assessmentstakefullaccountofpossiblehumanrightsimpacts;alicencewouldnot
be granted if the government judge that there is a clear risk that the proposed
exportmightbeusedforinternalrepression.Anybreachoftherelevantregulations
mayalsoresultinrevocationofacompany’sexportlicenceorevenprosecution.
The broad categories of goods which are subject to control under the UK export
licencingregimeare:
28Readmore:https://www.gov.uk/government/publications/transparency-in-supply-chains-a-practical-guide
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• Most items that have been specially designed ormodified formilitary use
andtheircomponents;
• Dual-useitems-thosethatcanbeusedforcivilormilitarypurposes-which
meetcertainspecifiedtechnicalstandardsandsomeoftheircomponents;
• Associatedtechnologyandsoftware;
• Goodsthatmightbeusedfortorture;
• Radioactivesources.29
The UK has also implemented the requirements of the OECD 2012 Common
Approaches,andconsidersrelevantadverseproject-relatedhumanrightsimpactsin
providingapplicableExportCreditAgency(ECA)supportthroughUKExportFinance
(UKEF).ECAwill consider relevantadverseproject-relatedhuman rights impacts in
providingapplicableexportcredit.UKEFwillalsoconsideranyreportsmadepublicly
available by the UK National Contact Point (NCP) in respect of the human rights
recordofacompanywhenconsideringaprojectforexportcredit.
IX. UnitedStatesOnDecember16,2016theObamaAdministrationreleasedtheU.S.NationalAction
PlanonResponsibleBusinessConduct.30TheUSNAPdoesnotcreateanynewlegal
rights or binding obligations for companies. Rather, it catalogues existing laws,
regulations and policies to ensure responsible business conduct. According to
commentators, had the Obama administration outlined its expectations of
companiesforresponsibleconductandtheupholdingofhumanrightsandanalysed
where gaps exist in the US legal framework that prevent corporate abuses and
ensure accountability, the Trump administration and the Republican-led Congress
would have affirmatively rejected it. Instead, the bar has been set low, giving
Trump’s corporate cabinet little in the way of a roadmap for how to drive 29Seethefulldetailshere:https://www.gov.uk/guidance/uk-strategic-export-control-lists-the-consolidated-list-of-strategic-military-and-dual-use-items30Availableat:https://www.state.gov/documents/organization/265918.pdf
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responsiblebusinessforwardorhowthey’llbeheldtoaccountfornotdoingso.31
Under US law, corporations are subject to a variety of state and federal legal
requirementswithrespecttorisk-creatingactivity,includingthepotentialforliability
for human rights violations. Although grounded in various areas of the US legal
system, these requirements compel risk-conscious US corporations to act in a
socially responsiblemannerboth in theUnited States andabroad.32The following
stateandfederalregulatoryschemesincludepotentiallyusefulprovisions:
• CommonLawFiduciaryDuties:Corporatedirectorsaregenerallyrequiredto
exerciseordinary careandprudence in the conductof corporateaffairs (the
“dutyof care”)andact ingood faith in thebest interestsof thecorporation
and its shareholders (the “duty of loyalty”). Under Delaware law, which
governs the internal affairs ofmany Fortune 500 corporations, the fiduciary
duty encompasses a duty to implement appropriate information, reporting
and internalcontrolsystemsatthecompany,andrequiresthatdirectorsuse
thesesystemstomonitorandoverseethecompany’soperations.
Directorsalsoareresponsibleforassessingtherisksthataresignificanttotheir
organizations (including, as appropriate, actions thatmay infringeonhuman
rights) and for ensuring that management is taking the steps necessary to
identify,measure,monitor and control these risks. Insofar as certain human
rights violations impose a meaningful risk to the corporation, boards of US
corporations are required to be aware and implement appropriate
mechanismstocontrolforsuchrisks.
31http://politicsofpoverty.oxfamamerica.org/2016/12/obamas-missed-opportunity-to-reign-in-corporate-abuses/32Submissions made to the UN Special Representative in the context of "Protect, Respect and Remedy"Framework and Guiding Principles (June 2008): http://corpgov.law.harvard.edu/wp-content/uploads/2008/06/weilgotshal-response-to-un-report-on-human-rights-and-business.pdf
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• AlienTortStatute:AfederalstatuteintheUS,knownastheAlienTortClaims
Act (ATCA) provides the basis for a tort (civil) action for the violation of
internationallaw.Thestatuterequiresthattheplaintiff(injuredparty)mustbe
an alien (i.e., non U.S. citizen) and that the alleged harm be “a tort only,
committedinviolationofthelawofnationsoratreatyoftheUnitedStates”33.
BothindividualsandbusinessentitieshavebeendefendantsinATCAlawsuits.
Extensive litigation against corporations for breaches of international
humanitarian and/or international criminal law has occurred in the United
StatesundertheATCA,sincetheseminalDoeIvUnocalCorp34case.
Notethatthislegislationisuniqueandthereisnoanalogueinothercountries’
legislation. Also note that relevant case law is not consistent and US courts
continue to shape and define the limits of liability under the ATCA. For
instance, inSosa v.Alvarez-Machain, the SupremeCourtheld that theATCA
was intended to permit only claims for wrongs based on “a norm of
international character accepted by the civilizedworld and definedwith (…)
specificity.”35Nineyears later, in the recentKiobelv.RoyalDutchPetroleum,
Co. (Shell) case, where the Supreme Court held that the application of the
ATCA is subject to the “presumption against extraterritorial application” and
thususuallywillnotapplytoclaims involvingallegedviolationsofcustomary
internationallawhavingoccurredinforeigncountries,butdidnotforecloseits
applicationagainstacorporation’sdirectorsoremployees.36
• Foreign Corrupt Practices Act: The FCPA prohibits bribery of foreign
governmentalofficials,candidatesforoffice,andofficialsofpoliticalpartiesfor
thepurposeofobtainingormaintainingbusiness,subjecttocriminalandcivil
enforcementactions. Italso imposes indirect liabilityofaparentcompany in 33ATCA,28USC§1350(2007)34963FSupp880(CDCal,1997)35542U.S.692,724(2004)36133S.Ct.1659(2013)
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relationtoactsofcorruptioncommittedoutsideUSterritorybyasubsidiary,
subcontractor or supplier. For offences committed under the FCPA an
individual can be fined up to US$250,000 per violation and may also be
sentencedtouptofiveyearsimprisonment.Acompanyfoundguiltyunderthe
FCPAisliableforafineofuptoUS$2,000,000perviolation.
US companies doing business abroad typically perform due diligence
investigations to evaluate potential sources of liability under the FCPA and,
whereviolationsorpotentialviolationsareuncovered, implementpreventive
measures.
• US Federal Sentencing Guidelines: The amended US Federal Sentencing
Guidelines provide that the fine payable by a corporation found guilty of a
federal crime will be substantially reduced if the corporation has an
appropriate compliance program in place prior to the crime. The Guidelines
therefore serve as a powerful incentive for corporations to implement and
monitoreffectivecomplianceprograms.
• Federal Securities Laws: The existing US securities regulations impose a
vigorous disclosure regime on corporations that are publicly traded on US
exchanges with the goal of protecting investors and furthering efficiency
throughamarket-basedmonitoringofcompanies, includingcivilandcriminal
penalties fordisclosureviolations,enforcementactionsbyregulators,and, in
certain cases, permit private citizens to bring lawsuits for alleged violations.
Material foreseeable risks faced by public corporations are required to be
disclosed in public filings and securities offering documents. As such, public
companiesarerequiredtodiscloseoperationsandactivitiesaffectinghuman
rights in the United States and abroad that create material risks to their
business.
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About The Silk Road Project
The Silk Road was an ancient network of trade routes that were for centuries central
to cultural interaction through regions of the Asian continent connecting the East and
West, from China to the Mediterranean Sea. Trade on the Silk Road played a
significant role in the development of the civilizations of China, the Subcontinent,
Persia, Europe, the Horn of Africa and Arabia, opening long-distance political and
economic relations between the civilizations.
The Silk Road project aims to promote accountability and protect human
rights in the context of Iran’s rapid return to the world markets after the 2015
Nuclear Deal.1 Through publishing reports on business and human rights in Iran, this
project intends to increase awareness among advocates of human rights, particularly
lawyers and civil society activists, and accountability in business and corporate
relations. It also aims to hold accountable corporates which are involved or complicit
in human right violations, using legal and other available mechanisms.
Justice for Iran
April 2017
Email: [email protected]
Website: www.justiceforiran.org
Copyright © Justice for Iran 2017