International Law, Human Rights and Corporations: Emerging Issues. Paper for the IBA Conference October 2007

Transcription

1 International Law, Human Rights and Corporations: Emerging Issues Paper for the IBA Conference October 2007

2 International Law, Human Rights and Corporations: Emerging Issues Authors: Craig Phillips Rachel Nicolson Jess Moir Allens Arthur Robinson 1. The Draft Norms, Human Rights and Corporations: Some Broad Themes The draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (the Norms) were adopted in August 2003, at a time of unprecedented debate at the international level on the application of human rights law to the operation of corporations. This debate continues with advocates for the direct application of human rights law to private actors challenging the traditional doctrinal view that human rights obligations appropriately lie with the State, which has responsibility for ensuring its private actors perform in accordance with those obligations. This paper explores a number of the key aspects of this debate. First, it summarises a number of developments at the international level in relation to corporate human rights obligations, namely the enactment of the Norms and what they sought to achieve; and appointment of the UN Special Representative of the Secretary General on Business and Human Rights, Professor John Ruggie, to address this emerging area of international and domestic law. Secondly, it outlines the relationship between international law, human rights and corporations, as it currently exists. This includes a discussion on and some examples of when corporations may be subject to international law obligations. It also includes an overview of how these corporate international law obligations may be experienced in an extraterritorial context, an issue that is currently being contested in a number of jurisdictions. A discussion on the role of voluntary standards and industry codes then follows, with these codes often examples of 'soft law' at the international level. The paper concludes with speculation on the directions this area of law may take and exploration of what this means for corporations.

3 2. Relevant Developments at the International Level 2.1 Summary While developments in respect of the international human rights law obligations of corporations could be said to have been evolving in a variety of fora over the last 30 to 40 years, it is in the last 5 years that clear steps have been taken at the international level to address this issue. The two key developments that occurred in this period were the enactment of the Norms in 2003 and the appointment of the UN Special Representative in The Draft Norms The Norms were approved by the UN Sub-Commission on the Promotion and Protection of Human Rights on 13 August These Norms were developed following consideration of the human rights law obligations of corporations by a number of international instruments and in a range jurisdictions. For instance, in 1997, the Commission on Human Rights Sub-Commission on Prevention of Discrimination and Protection of Minorities convened a panel of experts who issued a report entitled 'The Practice of Forced Evictions: Comprehensive Human Rights Guidelines on Development Based Displacement'. These guidelines aimed to create standards of conduct in respect of resettlement that occurred in connection with large scale development in infrastructure projects. In respect of general obligations, the guidelines stated that while responsibility for resettlement under international law is ultimately held by States, this does not relieve other entities from obligations in this regard, including transnational corporations. 2 It was as a result of these types of developments that the Norms evolved. The Norms affirmed obligations of States to ensure that corporations do not breach human rights. In doing so, they acknowledge that: States have primary responsibility to promote, secure the fulfilment of, respect, ensure respect of and protect human rights recognised in international as well as national law, including ensuring that transnational corporations and other business enterprises respect human rights. 3 The general obligations provision of the Norms goes on to state, however, that: Within their respective spheres of activity and influence, transnational corporations and other business enterprises have the obligation to promote, secure the fulfilment of, respect, 1 UN Sub-Commission on the Promotion and Protection of Human Rights resolution 2003/16, New.N.Doc.E/CN.4/Sub.2/2003/L.11, at 52(2003). 2 Article Commission on Human Rights Sub-Commission on Prevention of Discrimination and Protection of Minorities. Report entitled 'The Practice of Forced Evictions: Comprehensive Human Rights Guidelines on Development Based Displacement' General obligations, Norms.

4 ensure respect of and protect human rights recognised in international as well as national law, including the rights and interests of indigenous peoples and other vulnerable groups. 4 According to the preamble of the Norms, these obligations derive from the fact that transnational corporations and other business enterprises, as organs of society, are responsible, with States, for promoting and securing the human rights set forth in the Universal Declaration of Human Rights. The Norms assert an obligation on transnational corporations and other business enterprises, their officers and persons working for them, to respect generally recognised responsibilities in Norms contained in United Nations Treaties and other international instruments. 5 The Norms also sought to take into account the standards set forth in international soft law mechanisms such as the International Labour Organisation Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy; the Guidelines for Multinational Enterprises of the Organisation for Economic Co-operation and Development, and the United Nations Global Compact Initiative. The Norms also took note of: global trends which have increased the influence of transnational corporations and other business enterprises on the economies of most countries and in international economic relations, and of the growing number of other business enterprises which operate across national boundaries in a variety of arrangements resulting in economic activities beyond the actual capacities of any one national system. The Norms noted that corporations have the capacity to foster economic well being, development, technological improvement and wealth, as well as the capacity to cause harmful impacts on the human rights and lives of individuals through their core business practices and operations. The Norms go on to note that new international human rights issues and concerns are continually emerging and that transnational corporations and other business enterprises often are involved in these issues and concerns, such that further standard setting and implementation are required at this time and in the future. In this context, the Norms sought to impose on corporations obligations to protect the following particular human rights: right to equal opportunity and non-discriminatory treatment; right to security of persons; rights of workers; respect for the national sovereignty and human rights; obligations with regard to consumer protection; and obligations with regard to environmental protection. With respect to implementation, the Norms provided that corporations should adopt, disseminate and implement internal rules of operation in compliance with the Norms and 4 5 Ibid. Preamble, Norms.

5 should periodically report on the implementation of the Norms. Monitoring and verification of compliance would be undertaken by the United Nations, and other international and national mechanisms already in existence or yet to be created. States were required to establish and reinforce the necessary legal and administrative framework for ensuring the Norms were upheld. Corporations were required to give prompt, effective and adequate reparation to those persons, entities and communities adversely affected by a failure to comply with the Norms through reparations, restitution, compensation and rehabilitation for any damage done or property taken. 6 Unsurprisingly, the Norms put the issue of direct application of human rights obligations to corporations squarely on the agenda, and escalated international debate. The Norms sought to achieve that outcome by being an instrument for the "making and development of international law as to those responsibilities and obligations " 7 On one side, many members of the international legal community considered that the Norms should be realised as a formal international instrument of law that sought to apply human rights law obligations directly to corporations and provide an avenue of redress for victims of human rights violations. On the other side, international law traditionalists and many members of the corporate sector argued against what they considered to be a radical shift in international law paradigms. This debate evolved into a two year long stalemate on this international instrument. 2.3 The UN Special Representative his appointment and his key findings to date In July 2005, then United Nations Secretary General, Kofi Annan appointed a United Nations Special Representative on Business and Human Rights, Professor John Ruggie. Ostensibly, the United Nations Special Representative was appointed to resolve the stalemate on the Norms and to undertake a detailed examination of existing human rights law obligations of corporations under international and domestic law. He was also tasked with examining those human rights standards by which corporations do, or should, operate. The breadth of the mandate, and consequently the magnitude of the task assumed by Professor Ruggie, are both obvious. In his interim report to the Human Rights Council in April 2006, the UN Special Representative noted that globalisation has, amongst other things, imposed costs on people and communities, including corporate-related human rights abuses. 8 Following a further twelve months of extensive consultation and research under his mandate, in his first full report to the Human Rights Council on 9 February 2007, Professor Ruggie stated that: Long standing doctrinal arguments over whether corporations could be 'subjects' of international law, which impeded conceptual thinking on this issue and the attribution of direct legal responsibility to corporations, are yielding to new realities. Corporations are General provisions of implementation, Norms. Preamble Norms E/CN.4/2006/97, paragraphs 20 to 30.

6 increasingly recognised as 'participants' at the international level, with the capacity to bear some rights and duties under international law. 9 The main findings of his report were that : International law firmly establishes that States have a duty to protect against non-state human rights abuses within their jurisdiction, and that this duty extends to protection against abuses by business entities. Beyond the national territory, the scope of the duty will vary depending on the State's degree of power or effective control. 10 UN human rights treaty bodies and regional human rights systems affirm the State's duty to protect against non-state abuses and to establish similar correlative State requirements to regulate and adjudicate corporate acts. 11 As a result of key developments in international law and in domestic legal systems, there is growing potential for corporations to be directly and indirectly liable for international crimes. 12 In contrast to international crime, corporate responsibility for other human rights violations is 'subject to far greater existential debate'. 13 The traditional (and dominant) view is that international human rights instruments only impose indirect responsibilities on corporations, via State obligations. However, there is growing evidence of a less traditional view, that these instruments already impose direct legal responsibilities on corporations, but merely lack direct accountability mechanisms in respect of those obligations. For instance, the United Nations Sub-Committee on the Promotion and Protection of Human Rights, explaining that its proposed Norms 'reflect' and 'restate' existing international law, attributed the entire spectrum of State duties under the treaties to respect, protect, promote and fulfil rights to corporations within their 'spheres of influence'. The UN Special Representative also noted the growing number of soft law mechanisms that draw on human rights law in providing the standards of operation for corporations, for instance, the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, and the OECD Guidelines for Multinational Enterprises. 14 Professor Ruggie concluded that the fact that human rights law does not consistently govern corporate activity leaves large protection gaps for victims as well as uncertainty for companies A/HRC/4/035, paragraph 20. A/HRC/4/035, paragraph 10. Ibid, paragraph 16. Ibid, paragraph 22. A/HRC/4/35, paragraph 33. A/HRC/4/035, paragraphs 47 and 48.

7 In pursuing his mandate, Professor Ruggie declined to use the Norms as his 'point of departure'. 15 It has this become clear that the UN Special Representative has reached a decision to move beyond the Norms as the potential basis for international human rights law obligations of corporations. 3. International Law, Human Rights and Corporations 3.1 Summary It is clear from the findings contained in the UN Special Representative's February 2007 Report to the Human Rights Commission that the primary obligation to uphold international law remains with States. As noted by Professor Ruggie: the State duty to protect against non-state abuses is the very foundation of the international human rights regime. The duty requires the State to play a key role in regulating and adjudicating abuses by business enterprises or risk breaching their international obligations. 16 Stated simply, no general set of international law rules exists which governs the conduct of corporations. However, there are a number of ways in which international law can create liability for corporations and individuals, including corporate officers and employees. This requires an understanding of the relationship between international law and domestic law, international criminal law and the extraterritorial application of international law standards. It also requires an understanding of how voluntary standards and industry codes fit within the international law structure and reflect international law standards. 3.2 When is a corporation subject to international law obligations under domestic law? International law standards may be incorporated into domestic law that regulates individual and corporate activity in a number circumstances. The most straightforward example of this occurs when an international instrument is directly incorporated into domestic law. This most commonly occurs when a State signs or 15 In his statement to United Nations Human Rights Council (Geneva) on 25 September 2006, introducing his interim report and outlining his work plan, Professor Ruggie explained his position in relation to the Norms: 'My major concern was the legal and conceptual foundations of the Norms, especially as expressed in the General Obligations section and the implications that flow from it. I judged them to be poorly conceived and, therefore, highly problematic in their potential effects. In the best case scenario, these formulations would do little more than keep lawyers in gainful employment for a generation to come. But in the worst case scenario, I fear, they would turn transnational corporations into more benign twenty-first century versions of East India companies, undermining the capacity of developing countries to generate independent and democratically controlled institutions capable of acting in the public interest which to my mind is by far the most effective guarantor of human rights. Accordingly, I moved on with the mandate I was assigned not to universal applause, I am well aware, but with the thoughtful engagement of stakeholders across a broad spectrum, from global business associations to campesino groups in the Andean highlands.' (at page 3) 16 A/HRC/4/035 paragraph 18

8 ratifies an international instrument and then amends or enacts domestic law to give domestic effect to the obligations that arise upon signing or ratifying that instrument. For instance, Australia's proposed International Trade Integrity Bill 2007 was introduced in the aftermath of the Cole Report on the UN Oil-for-Food Programme. The Bill (which has been approved by the Senate Legal and Constitutional Affairs Committee) would amend existing legislation to 'strengthen enforcement of all UN sanctions and combat foreign bribery.' 17 The Bill would create a new offence (with significantly increased penalties) for individuals or corporations that engage in conduct in contravention of relevant UN sanctions with strict liability for corporations. It would also create an offence for people or corporations that provide false or misleading information in relation to sanctions, and would give increased information-gathering powers to agencies responsible for the enforcement of sanctions. Further examples of the realisation of international law obligations through domestic legislation are to be found in the ACT's Human Rights Act 2004 (the ACT HRA) and the Victorian Charter of Human Rights and Responsibilities 2006 (the Charter). The rights contained in the ACT HRA and the Charter were drawn from the International Covenant on Civil and Political Rights (the ICCPR). This is starkly illustrated in the ACT HRA, which contains a table setting out the ICCPR source of the human rights that it protects. 18 In addition, these instruments explicitly provide that courts may consider international law (and the judgments of international courts and tribunals) when interpreting human rights and legislation. 19 This is effectively a top down incorporation of international law in domestic law. However, the implementation of relevant principles of international law through the enactment of domestic legislation is not the only means by which obligations under international law may arise. Relevant principles of customary international law may be reflected in, and form part of, the domestic common law or customary law of various jurisdictions. Further, in many domestic legal systems, common law rights pre-dated the enunciation and protection of rights at an international level. For example, English common law recognised rights of procedural fairness and natural justice long before those rights were guaranteed in international instruments such as the ICCPR. These are the primary means by which international law standards may be applicable to individuals and corporations. The following diagram attempts to illustrate the key aspects of the relationship between international and domestic law. 17 The Parliament of the Commonwealth of Australia, House of Representatives, International Trade Integrity Bill 2007, Explanatory Memorandum, at page 1. Available at: < (2). Human Rights Act 2004 (ACT), Schedule 1. See Human Rights Act 2004 (ACT), s 31(1); Charter of Human Rights and Responsibilities Act 2006 (Vic), s

9 International law and domestic law INTERNATIONAL LAW CUSTOMARY INTERNATIONAL LAW) JUDICIAL DECISIONS & WRITINGS TREATIES/ CONVENTIONS GENERAL PRINCIPLES OF NATIONAL LAW SOFT LAW UN GENERAL ASSEMBLY RESOLUTIONS STATES (MEMBERS) IMPLEMENTING LEGISLATION INTERNATIONAL CRIME COMMON LAW STATUTE DOMESTIC LAW COMPANIES INDIVIDUALS 3.3 International criminal law the anomaly As recognised by the UN Special Representative in his February 2007 Report, it is in the area of international criminal law that corporations most directly experience international law obligations. In this sense, international criminal law is an anomaly in this matrix. In his 2007 Report, Professor Ruggie suggests that there is a trend toward increased recognition of corporate liability for international crimes. He describes 'an expanding web of potential corporate liability', created by the interplay between two key developments: 1. 'the expansion and refinement of individual responsibility by the international ad hoc criminal tribunals and the ICC Statute'; and 2. 'the extension of responsibility for international crimes to corporations under domestic law'. 20 The UN Special Representative notes that, under international law, individuals may be liable for crimes that they themselves commit, and that a superior may be liable for crimes committed by a subordinate (where the superior had reason to know the crime would be perpetrated and failed to prevent it). In addition, individuals may be liable for lesser levels of participation, such as 'aiding and abetting', or engaging in a 'common purpose' or a 'joint criminal enterprise'. 21 Professor Ruggie observes that it is unlikely that a 'legitimate' corporation will directly violate international criminal law; it is much more likely that such an entity will risk exposure A/HRC/4/035, paragraph 22. A/HRC/4/035, paragraph 23.

10 to liability by reason of allegations that the corporation has been complicit in a crime committed by a third party (such as a public or private security force). He states that: The international tribunals have developed a fairly clear standard for individual criminal aiding and abetting liability: knowingly providing practical assistance, encouragement or moral support that has a substantial effect on the commission of the crime. 22 He acknowledges that the legal idea of 'moral support' lacks clarity, and notes that: But a Company in good faith trying to avoid involvement in human rights abuses might have difficulty knowing what counts as moral support for legal purposes. Mere presence in a country and paying taxes are unlikely to create liability. But deriving indirect economic benefit from the wrongful conduct of others may do so, depending on such facts as the closeness of the company s association with those actors. Greater clarity currently does not exist. However, it is established that even where a corporation does not intend for the crime to occur, and regrets its commission, it will not be absolved of liability if it knew, or should have known, that it was providing assistance, and that the assistance would contribute to the commission of a crime. 23 Another way in which corporations are increasingly experiencing international criminal law obligations is through developments in domestic law following enactment of the Rome Statute of the International Criminal Court (the Rome Statute). The Rome Statute effectively established the International Criminal Code and codified a narrow category of international crimes that are considered to apply under customary international law, not just to States, but to natural persons. These international crimes are known as jus cogens offences, namely torture, genocide, crimes against humanity, war crimes and slavery and private piracy. The Rome Statute gave jurisdiction to the international Criminal Court only over these offences and only over natural persons. As a result, directors, officers and employees are potentially subject to ICC jurisdiction. The Rome Statute did not give the ICC any jurisdiction over corporations, however, the incorporation of the provisions of the Rome Statute led to numerous States implementing legislation that extends liability for jus cogens offences to corporations. This is certainly the case in respect of the Australian Criminal Code, of which Part 2.5 extends liability for all offences within the Criminal Code to corporations. Following Australia's ratification of the Rome Statute, the Criminal Code was amended to include the crimes of genocide, crimes against humanity and war crimes. 3.4 When do these international law obligations play out extraterritorially? Another issue that often arises in the context of corporate obligations for international human rights law standards is the application of these standards extraterritorially. This issue arises because of the transnational nature of many corporations' operations, which may result in different geographic arms or subsidiaries of a corporation being A/HRC/4/035, paragraph 31. A/HRC/4/035, paragraph 32.

11 connected to the same factual circumstance where it is alleged that human rights violations have occurred. There are two key ways in which international law standards are imposed or experienced by corporations extraterritorially. First, the indirect application of international law standards may occur when standards in one jurisdiction are not met in another. Often a corporation has its head office in one country and its project operations in another. The country hosting its project operations may implement legislation (in accordance with international law obligations) that exceeds the legal requirements imposed by the corporation's home State. Alternatively, and more commonly, it may be that the domestic legislation of that corporation's home jurisdiction contains more onerous obligations than does the project host country. For instance, the US Foreign Corrupt Practices Act 1977 (FCPA), which prohibits bribery of foreign officials, was amended in 1998 to implement the provisions of the Organization for Economic Cooperation and Development's Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, through domestic law. 24 The amended Act gives extraterritorial jurisdiction to US Courts in respect of activities of natural or legal persons undertaken extraterritorially in breach the Act. This has resulted in a number of prosecutions of US-based corporations for their activities overseas. 25 Another way in which a corporation may be exposed to international law obligations is through the adoption of relevant principles of international law in domestic laws that have extraterritorial reach. A unique example of this is the Alien Tort Claims Act in the United States, which gives the US Federal Court jurisdiction over civil actions brought by aliens for torts committed in violation of international law or a US treaty Voluntary standards and industry codes where do they fit in? Voluntary standards and industry codes often present confusion for corporations in respect of their legal status. This is because a number of voluntary standards are also effectively soft law within the international law system whereas others are merely industry codes developed to address industry specific issues. Soft laws are best characterised as either a product of the UN system, such as the UN Basic Principles on the Use of Force and Firearms by Law Enforcement Officials, or as agreements between particular States which, while not representing agreement between all UN Member States, may develop into such an instrument. An example of this would be the OECD Guidelines on Multi-National Enterprises See the United States' Department of Justice website: < See the OECD website for further detail and examples: 26 see A/HRC/4/035 para 30, where Professor Ruggie notes that more than 40 ATCA cases have been brought against corporations in the United States. Professor Ruggie describes this as being "the largest body of domestic jurisprudence regarding Corporation responsibility for international crimes".

12 Soft law is distinct from industry codes designed to address certain issues that arise within industries, for instance, The International Cyanide Management Code or the Kimberly Process Certification Scheme. These voluntary standards, whether they be soft law or mere industry codes, apply to corporations in a variety of ways and have a range of potential impacts. These include utilization by corporations: as published business practice standards; as internal policies; and as terms of contracts with other parties. Pursuant to certain voluntary standards, corporations may also be subject to monitoring by government or regional bodies, for instance, the OECD Guidelines for Multi-National Enterprises and the UN Global Compact. These can have a range of legal ramifications for corporations including consumer protection or trade practices type claims, shareholder resolutions or class actions and contract-based claims. They can also play a role in respect of corporate reputation. 4. International Law, Human Rights and Corporations Where is this issue of Law going and what does it mean for Corporations? It is clear that there is an increasing consideration of whether and how international human rights law obligations may apply directly or indirectly to corporations at the international level. It is also clear that, either as a result of or as an impetus to its increasing international profile, this issue has moved on to the domestic law agenda of a growing number of countries. As well as being on the agenda of the international community of States and of the individual activities of States, corporations themselves are increasingly demonstrating a tendency to rely on or reference international law and human rights as operational standards, contractual obligations etc. As the international and domestic human rights law obligations of corporations evolve, it is increasingly important that corporations develop an understanding of the role of international law and human rights law. This includes an understanding of potential exposure, both at law and in respect of corporate reputation. It also includes an understanding of how international law and human rights can be utilised positively by corporations to minimise legal risk associated with human rights allegations and to meet their corporate social responsibility commitments at a best practice level.