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International Business Obligations

Focus: UK report on business and human rights

14 January 2010

In brief: A major United Kingdom Parliamentary Committee report on business and human rights in the UK recommends that the UK Government develop a clear set of standards that UK businesses would be expected to meet in order to comply with their responsibility to respect human rights. Partner Annette Hughes , Senior Associate Rachel Nicolson and Lawyer Catie Shavin look at the report, which also calls on the UK to provide leadership on international business and human rights issues.

How does it affect you?

  • If the recommendations made in the report are adopted, companies may be required to undertake human rights due diligence for their business operations and may face legal liability in the UK for breaches of human rights occurring both within the UK and in their extraterritorial operations.
  • Developments in the UK concerning business and human rights are likely to impact international debate and practice, and may impact upon and influence domestic developments in other states, including Australia. This is particularly the case if the UK Government promotes the adoption of an international agreement.

Introduction

On 16 December 2009, the UK Parliament's Joint Select Committee on Human Rights published a report entitled Any of our business? Human rights and the UK private sector.

The report followed a major inquiry which considered the impact of the private sector on human rights, the manner in which this impact is currently being addressed by the UK Government and relevant work and developments concerning business and human rights outside of the UK. The purpose of the report is to raise awareness of these issues and make recommendations to the UK Government.

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Context of the report

There is increasing recognition, both in the UK and internationally, of the necessity of addressing the human rights impacts of business and the complexity of the issues to be addressed. This includes corporate conduct both at home and overseas.

The committee acknowledged that the work of the UN Secretary General's Special Representative on human rights and transnational corporations and other business entities, Professor John Ruggie, is the main focus of the current international debate on these issues. In 2008, Professor Ruggie presented the 'protect, respect and remedy' framework, which is based on three core principles:

  • the state's duty to protect against human rights abuses;
  • corporate responsibility to respect human rights; and
  • access to an effective remedy for breaches of human rights.

Professor Ruggie is due to make further recommendations in 2010 and 2011 that should provide guidance as to how obligations under the framework are to be met.

In the report, the committee strongly endorsed Professor Ruggie's work and called on the UK Government to continue its support of his work and encourage the engagement of UK business.

The committee's inquiry considered business and human rights issues in the context of the current domestic and international legal and political regimes to which UK businesses are subject. Within the scope of these are the UK's obligations under international law and as a member of the European Union, obligations of business and government departments and agencies under domestic legislation such as the Human Rights Act 1998 and the Companies Act 2006 and forthcoming developments such as the draft Bribery Bill. It also considered the impact and utility of other international initiatives that address the impacts of business on human rights, including voluntary standards and programs such as the OECD Guidelines for Multinational Enterprises, the UN Global Compact, the Extractive Industries Transparency Initiative and the Kimberley Process Certification Scheme.

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Findings of the report

In considering the human rights impacts of UK business, the committee expressed concern about the range and seriousness of allegations that have been made against UK-based companies. However, it also recognised the potential of businesses to positively contribute to the communities in which they operate, for example, by protecting the rights of employees.

In the report, the committee welcomed Professor Ruggie's recognition that business' responsibility to respect human rights is not voluntary and stated that positive steps, such as undertaking comprehensive human rights due diligence, must be taken to recognise and mitigate the effects of business activities on human rights in order to discharge this responsibility.

It acknowledged that businesses are increasingly taking steps to address their human rights impacts, and that many of these have helped to progress debate on these issues. However, the committee also noted that the perception that certain measures taken by businesses are a mere exercise in 'good PR' hinders progress and that few businesses meet the due diligence standards Professor Ruggie proposes.

The committee welcomed a number of Government initiatives, including the Government Private Sector and Human Rights Project and the Foreign and Commonwealth Office Toolkit. However, it expressed concerns about the limitations of these projects and the weaknesses apparent in the Government's current strategy for business and human rights. In particular, it was critical of the 'undue priority' given by the Government to voluntary initiatives, found that Government policy lacked coherence and that it was failing to provide a clear lead. The committee recommended that the Government review its approach and develop a consistent strategy with a clear message on business and human rights.

While acknowledging concerns about the application of extraterritorial standards overseas, it recommended that the Government consider the standards expected of UK companies in respect of its own involvement with those businesses. The committee further recommended that any new Government strategy should build on Professor Ruggie's work and the 'protect, respect and remedy' framework. It stated that the key aim of this strategy should be:

...to set out clearly for businesses, consumers and the wider community what the UK expects of UK business. The international human rights obligations of the UK and UK Government policy on human rights should inform its policies for the private sector both within the UK and overseas. The strategy should present a clear and coherent connecting thread between domestic policy, foreign policy and the UK's international diplomacy, including at the EU, the OECD and the UN.1

It expressed disappointment that the UK Government appears to have ruled out incorporating Professor Ruggie's work into UK policy before its completion in 2011. The committee stated that 'international debate should not preclude innovative policies at home'2 and expressed concern that the reluctance of states to either act unilaterally or commit to an international solution will preclude progress on these issues.

It also found many substantive and procedural barriers to litigation against companies in the UK, but was not convinced that its investigation had provided sufficient evidence to determine the appropriateness of significant changes to the civil legal system or to justify a focus on new judicial remedies. The committee considered that the priority of Government is to clarify the human rights standards that businesses need to meet.

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Recommendations of the committee

The report notes that it will not be possible to address the complex issues that arise concerning the impact on human rights of cross-border commercial operations with a single solution and that a collaborative approach, involving a range of responses, is necessary.

In addition to its general recommendation that the UK Government review its strategy on business and human rights with a view to adopting the 'protect, respect and remedy' framework and developing an international agreement, the committee made a number of specific recommendations. These recommendations include that the UK Government:

  • use its position as a purchaser and investor to review policies, laws and rules on public procurement, Export Credit Guarantees, company law, listing rules and investment policy;
  • take a strong approach to potential business impacts on human rights in conflict zones;
  • undertake a review of labour and trades union laws in the context of the UK's international obligations;
  • consider amending the Companies Act 2006 to require companies to undertake an annual human rights impact assessment;
  • provide guidance to business on the nature of their responsibility to respect human rights, the standards required of them and the need for human rights due diligence;
  • consider and clarify the scope and operation of the Human Rights Act 1998 with regard to corporate activity;
  • provide a clear policy on how it will respond to critical findings by the UK NCP (which investigates allegations of non-compliance with the OECD Guidelines for Multinational Enterprises); and
  • endeavour to secure international or EU agreement on a regulatory scheme concerning the operation of private military security companies.

The committee further recommended that the Government explore the scope for expanding the role and interaction of UK national human rights institutions generally, and proposals for a UK commission for business, human rights and the environment in particular.

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Conclusion

While acknowledging some positive developments on business and human rights issues, the committee has taken a strong position on the failures of UK businesses to respect human rights, both domestically and overseas, and the reluctance of the UK Government to provide clear leadership and guidance on these issues.

The committee has recommended that the UK take a leadership position in the debate concerning business and human rights 'to ensure that multinational firms and other corporate entities respect human rights wherever they operate'.3 It has further stated that the ultimate aspiration of this debate should be an international agreement.

The report is significant in the comprehensive approach it has taken to its assessment of business and human rights in the UK and in the strength and range of its recommendations. Adoption by the UK Government of any of the recommendations in the report may have significant consequences for UK businesses and their subsidiaries. The UK Government response to this report is also likely to impact the international debate on these issues, and may influence legal and policy developments at both the international and domestic level, including in Australia.

Footnotes
  1. Joint Committee on Human Rights, Any of our business? Human rights and the UK private sector (16 December 2009), p 64.
  2. Ibid, p 34.
  3. Ibid, p 16.

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