Donald Robertson, Partner, +61 9225 5523, [email protected]
Alex Newton, Consultant, +61 9225 5254, [email protected]
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
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© Herbert Smith Freehills 2016
SPEAKERS
Donald Robertson
Direct +61 2 9225 5523
Mobile +61 414 275 523
Email [email protected]
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 [email protected]
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.