Allens

International Business Obligations

Focus: Corporate Responsibility – International law – a new force in shaping corporate conduct

28 May 2008

In brief: In April this year, the United Nations Special Representative on Business and Human Rights, Professor John Ruggie, released a report that aims to provide an international framework for action on the role of corporations in respect of human rights. If the report is adopted by the United Nations Human Rights Council in June, it will be the first time that an official position on corporate human rights responsibilities will have been adopted at the international level. Allens Arthur Robinson has advised numerous clients on human rights-related compliance, risk and litigation, and has been assisting the UN Special Representative since soon after his appointment in 2005. Partner Annette Hughes and Senior Associate Rachel Nicolson comment on these international developments and their relevance to corporate operations.

How does it affect you?

  • The framework proposed in the United Nations report:
    • provides guidance for companies on best practice approaches to meeting the increasing expectations they face in respect of human rights and international law;
    • provides an opportunity for companies to consider ways to address legal exposure and minimise litigation risk that may arise in connection with perceived corporate impacts on human rights in Australia or overseas; and
    • may be used to develop prudential risk management strategies, with human rights obligations increasingly likely to permeate domestic law in areas such as director's duties, due diligence and corporate reporting.

Background

The April 2008 report is the result of a consultation and investigative process that began in June 2005 when then United Nations Secretary General, Kofi Annan, appointed Professor John Ruggie as Special Representative on the issue of human rights and trans-national corporations and other business enterprises. The mandate of the Special Representative includes:

  • identifying and clarifying standards of corporate responsibility with regard to human rights;
  • elaborating on the role of States in regulating corporations with regard to human rights;
  • developing materials for human rights impact assessments of corporate activity; and
  • compiling a compendium of best practices by States and business on this issue.

Since his appointment, Professor Ruggie has undertaken extensive research and consultation on the perceived impact of corporate activity on human rights; and the existing international and domestic human rights law obligations of corporations.

Allens Arthur Robinson (AAR) has contributed to this research, by preparing a comprehensive brief on the human rights law obligations of corporations in seven jurisdictions in the Asia-Pacific, including Australia, China, India and Indonesia. AAR has also provided Professor Ruggie with research on the extent to which a corporate duty to respect human rights may be considered to exist under Australian domestic law.

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The UN Report: a framework for business and human rights

Professor Ruggie has released two reports prior to the April 2008 report, both of which have focused on mapping international standards of responsibility and accountability for corporate conduct in respect of human rights. In general terms, these reports found a lack of a systematic approach and gaps in governance at both the international and domestic levels in respect of corporate human rights impacts.

The April 2008 report aims to address the issues identified by the UN Special Representative's work to date, by proposing a triple-pronged international policy framework focused on:

  • the State duty to protect against human rights abuses by third parties, including business;
  • the corporate responsibility to respect human rights; and
  • the need for more effective access to remedies for victims of corporate related human rights violations.

We address each of these three elements below.

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The State duty to protect from human rights violations

The State duty to protect from human rights violations is described as requiring both regulation and adjudication of corporate activities with regard to human rights. The report states that this government duty applies to the activities of all types of businesses – national and trans-national – though it acknowledges that the role of home States in legislating for the extraterritorial activity of their corporate citizens remains unresolved. Professor Ruggie proposes that governments should take further steps to foster corporate cultures in which respecting rights is an integral part of doing business, and that this may include the use of 'corporate culture' in determining corporate liability, as is the case under Australian criminal law. The report also proposes that States investigate policy alignment on implementation of their international human rights law obligations concerning corporations, and that home States should particularly address the human rights – related issues and exposures faced by corporations operating in conflict zones overseas.

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Corporate responsibility to respect human rights

On the second limb of the proposed framework - the corporate responsibility to respect human rights - the UN Special Representative cites the recognition of this principle in 'soft' law instruments such as the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises and by numerous multinational organisations in their policies and practices. The April 2008 report quotes the International Organisation of Employers' statement that companies 'are expected to obey the law, even if it is not enforced, and to respect the principles of relevant international instruments when national law is absent'.1 The UN Special Representative concludes that the corporate duty to respect human rights 'essentially means not to infringe on the rights of others – put simply, to do no harm'.

The report goes on to identify a process of due diligence that corporations may undertake to assist in the discharge of their responsibility to respect human rights. This includes:

  • adopting a human rights policy;
  • undertaking human rights impact assessments on proposed activities that may affect human rights;
  • integrating human rights policies throughout their operations; and
  • monitoring and auditing human rights impact and performance.

Professor Ruggie notes that the corporate responsibility to respect human rights includes avoiding complicity by companies in human rights abuses where the actual harm is committed by another party, including government and non-State actors.

The types of corporate activities that have to date typically been the subject of allegations of corporate impacts on human rights, either directly or by way of complicity in the actions of others, have included corporate arrangements with public and private security forces, resettlement of persons for project activities, and financing of projects with identified environmental or social risk.

Due diligence is proposed as a means of minimising such exposure.

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Promoting access to justice

The report discusses the increasing expectation that States will take concrete steps to adjudicate corporate-related human rights violations. Commentary is provided on the gaps in existing grievance mechanisms and improvements are proposed for judicial mechanisms, non-judicial grievance mechanisms, company level grievance mechanisms, State based non-judicial mechanisms, multi stakeholder or industry initiatives and financier grievance mechanisms.

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Conclusion

The evolving human rights obligations of corporations demonstrate the increasing relevance of international law and standards to the activities of corporations operating in a global environment. As well as informing domestic law development, international law, including human rights law, is increasingly relied upon by corporations to provide guidance on best practice in areas as diverse as labour and employment, environmental management, community and stakeholder relations, anti-corruption and engaging with foreign governments.

Footnotes
  1. International Organisation of Employers, International Chamber of Commerce, Business and Industry Advisory Committee to the Organisation for Economic, Co-operation and Development (OECD), Business and Human Rights: the role of government in weak governance zones, December 2006 paragraph 15.'

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