By Stuti Subbaiah Kokkalera*
International human rights standards have traditionally been the responsibility of governments, aimed at regulating relations between the State and individuals and groups. But with the increased role of corporate actors, nationally and internationally, the issue of businesses’ impacts on the enjoyment of human rights has been placed on the agenda of the United Nations. Over the past decade, the United Nations human rights machinery has been considering the scope of businesses’ human rights responsibilities and exploring
ways for corporate actors to be accountable for the impact of their activities on human rights. As a result of this process, there is now greater clarity about the respective roles and responsibilities of governments and business with regard to protection and respect for human rights. Yet, this is just the beginning of an ongoing debate. Multinational corporations (MNCs) initially found it easy to shrug off their responsibility until the media deluge in the 1990s over Nike sweatshops in South East Asia. Examples of Dhaka, Karachi or Chengdu have shown the lack of responsibility in preventing such disasters- reaffirming the need for big businesses and their governments in conducting human rights due diligence.
How do we determine accountability?
To put it rather simply, in the sequence of accountability in a global supply chain, the corporation at the top of the chain employs suppliers, generally in another country where the cost of production is lower. These suppliers are usually smaller businesses, sometimes family-owned, who either own factories or who may sub-contract their work to other factories. These factories employ the workers who produce the different products required for the final product for the corporation. The production per day or per month in the factories is determined according to the demands made by the corporation. The corporation then pays the suppliers who then pay the workers. But as Professor John Ruggie points out, though this organizational form has enhanced the economic efficiency of firms, it has also increased the challenges companies face in managing their global value chains- the full range of activities required to bring a product or service from its conception to end use. As the number of participating units in value chains increases so, too, does the potential vulnerability any particular link in the chain poses to the global enterprise as a whole. At the same time, these distributed networks also have increased the available entry points through which civil society actors can seek to leverage a company’s brand and resources in the hope of improving not only the firm’s performance, but also the setting in which it operates. In this regard, there are several legal challenges to a multinational corporation’s accountability. Firstly, such corporations pose a challenge to international law because they are not directly governed by it. Secondly, these corporations need not be directly governed by the domestic laws of a country in which they operate in unless the subsidiary or supplier in that country is under close operational control and not just an agent of the larger corporation. In terms of a supplier relationship, the corporation at the top will always be able to limit their liability as an agent or customer. This makes it more imperative to establish an international legal regime where corporations are held accountable for their actions, particularly in countries that face rule of law challenges.
International law and BHR
The root cause of the business and human rights predicament today lies in the governance gaps created by globalization- between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences. These governance gaps provide the permissive environment for wrongful acts by companies of all kinds without adequate sanctioning or reparation. How to narrow and ultimately bridge the gaps in relation to human rights is a fundamental challenge. There have been several initiatives in the international legal arena to address this conflict between business and human rights. However, these have all been voluntary regulations, therefore allowing corporations the choice to accept and comply with them. In some instances, the obligation to comply has been as a result of maintaining a good reputation in the market. The international guidelines as of today include the UN Global compact which preceded the UNGPs, the OECD Principles on Multinational Enterprises, ISO 26000 on Social Responsibility and the EU Strategy on Corporate Social Responsibility.
Of particular interest to international legal practitioners is the United Nations Guiding Principles on Business and Human Rights (UNGPs). In 2011, the UN Human Rights Council endorsed the UNGPs making it the first international corporate human rights responsibility initiative by the UN. Also known as the Ruggie Principles since its principle author was Professor John Ruggie; the UNGP framework is modeled on three pillars that outline how both states and businesses should consider human rights impacts. The three pillars are explained below:
- State duty to protect human rights:
States must protect against human rights abuse within their territory and/or jurisdiction by third parties, including business enterprises. This requires taking appropriate steps to prevent, investigate, punish and redress such abuse through effective policies, legislation, regulations and adjudication. The premise is that States wield enormous influence over corporations and there is no reason for states to not use this leverage to push for better human rights practices in either their national laws or contractual obligations in federal procurement contracts. David Vogel’s theory of the “California effect” shows that trade serves as a vehicle for transmitting exporting countries’ regulatory standards to importing countries. Vogel argued that product standards that are enshrined in governmental regulations could influence better practices in production, thus using international trade as a power piece to promote better business. He based his theory on environmental regulations in the United States. Following the 1970 Clean Air Act respecting auto emission standards, California chose to enforce stricter regulations rather than the federal regulations. In the early 1990s, Congress once again raised the national standards to those of California’s and following this California raised its standards again. Thus Vogel conceded that “California’s political clout and market size presumably are major factors in the state’s capacity to influence other jurisdictions.” Though the UNGPs are voluntary, they serve as an example of international instruments raising standards for States to elevate the “floor” for human rights considerations. While in the US, it may have shown that it only works at a federal level; however that does not preclude this theory from being effective in the global arena. The California effect is equally applicable to the business and human rights domain.
- The corporate responsibility to respect human rights
As the basis for embedding their responsibility to respect human rights, business enterprises should express their commitment to meet this responsibility through a statement of policy. Thus, the UNGPs require both industry cooperation as well as the participation of the States in protecting human rights at all levels of business. These principles have also opened the door for corporations to come together and ensure greater transparency of their policies and more importantly the transparency between the corporations and the States in which they operate. For example, in terms of preserving the basic human rights of workers under the UNGPs, Radu Mares writes about the role of the “buyer corporations” which are the multinational corporations that buy from suppliers. He states: “the role of the buyer company remains essential to solve other difficult issues, such as that of worker remuneration.” He discusses the policy adopted by British retailer Marks and Spencer. This was the first retailer which has committed to ensuring living wages for suppliers’ employees. According to the company, it promised to: “..implement a process to ensure our clothing suppliers are able to pay workers a fair ‘living wage’ in the least developed countries we source from, starting with Bangladesh, India and Sri Lanka by 2015. We will achieve this by ensuring that the cost prices we pay to our suppliers are adequate to pay a fair living wage…”. Therefore, the Guiding Principles reinforce a very important principle in terms of the leverage that states and corporations have in public space. By urging their suppliers to comply with the principles, larger corporations can inspire better human rights protections in general.
- Access to remedy for victims of human rights impacts from businesses
This, in my opinion, is the most precarious of the pillars. As part of their duty to protect against business-related human rights abuse, States must take appropriate steps to ensure, through judicial, administrative, legislative or other appropriate means, that when such abuses occur within the territory and/or jurisdiction those affected have access to remedy. This implies that states must take cognizance of these cases and ensure that through any measure, victims must have access to remedy. But, given the large hurdles many plaintiffs face in bringing claims in the host State (where the harm occurred), the ability of courts in the home State (where the business is domiciled) to consider these claims often provides the only avenue for victims to obtain a remedy. A 1789 law in the United States titled the Alien Tort Statute (ATS) has served as a way for individuals in the U.S to litigate transnational human rights abuses. ATS is hardly a long statute. In fact, all it reads is: “The District Courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States”. There have been a few prominent cases under this statute. In 1980, in Filartiga v Pena Irala, the Second Circuit Court of Appeals held that the jurisdiction under ATS allowed the plaintiffs to sue the defendants, regardless of their citizenship and where the violations occurred. Years later in Sosa v Alvares-Machain, the United States Supreme Court, for the first time on a matter related to ATS, held that ATS could be used for a “narrow class of egregious international human rights violations”. The Court discussed four key principles under the framework by which a tort could be brought for the violation of human rights: (i) universality, meaning, the action must be recognizing as violating the law of nations, whether it is customary international law or by treaties; (ii) obligatory nature of the prohibited norm; (iii) specificity, that the action must be justiciable with regard to how the harm was caused and that in fact it violate some part of the law of nations and (iv) prudential factors could weight against non-justiciability but must be justified, for instance, if it is in the interest of public policy. So now, the question was whether this included harms caused by corporations? In Kiobel v Royal Dutch Petroleum Co., the Supreme Court laid to rest this issue- to some extent. In this case, the plaintiffs were citizens of Nigeria who claimed that the Royal Dutch Shell Petroleum Company and their subsidiary in Nigeria aided and abetted the Nigerian government in the 1990s in committing human rights abuses. Prior to this case reaching the Supreme Court, there was a circuit split where some circuit courts ruled that ATS could not be used to bring claims against corporations for violations of the law of nations while others ruled that it could. In 2013, in a 5:4 majority, the Supreme Court, while not answering the question of corporate liability held that ATS does not provide jurisdiction for a claim against a violation that occurred outside the territory of the United States. Therefore, in discussing the presumption against extraterritoriality, the Supreme Court left open the possibility that claims that “touch and concern the territory of the United States” . . . “with sufficient force” could rebut the presumption against extraterritorial application of the ATS. Finally, the Court indicated that because businesses are often present in many States, “mere presence” of a business in the United States would not be enough to meet the “touch and concern” test to overcome the presumption. What this shows is that without States making the effort to hold corporations accountable for their actions beyond their territorial presence, access to remedy for violations of human rights is limited.
Where do we go from here?
I can surmise three measures:
- States can actively pursue the business and human rights discourse in enacting new laws that systematically deal with the issue. Such laws must not only cover transnational corporations but also domestic entities. The State’s duty to protect can include formulating a national action plan as well as making the proper amendments to labor laws, mining regulations, worker safety laws, environmental protection and any other laws that address the business and human rights conflict.
- State and international bodies need to engage with corporations to create private regulations that are compatible with the domestic laws in the countries they operate in to promote and respect human rights. One of the ways that multinational corporations can leverage their purchasing power to strengthen human rights is through their contractual commitments with their suppliers.
- The most challenging aspect is providing effective judicial and alternative remedies to any violations of human rights. But this could be possible by establishing dispute resolution mechanisms within the supply chain or by granting access to courts or other quasi-judicial entities, and making sure that their decisions are enforceable.
If executives at many firms see risk and high costs in the failure to respect human rights, why are more firms not following the guiding principles or even adopting human rights policies? There may be several reasons. First, human rights are relatively new on the business agenda. Second, governments have long struggled to respect human rights. Executives are in an early phase of the learning curve. Early adapters may be better positioned to amortize the costs of adhering to human rights and could use their support of human rights as a marketing and public relations tool. Those corporations that have not acted may not perceive that their firm is at risk for directly or indirectly violating human rights or they may not be aware of the Guiding Principles. Third, implementing the guiding principles will be expensive and time consuming. Many executives are not yet convinced they need to do more than the little they are already doing. However that is not to say that not all corporations are unconvinced. The Business and Human Rights Center has published a list of companies that have taken the step of adopting a formal company policy statement explicitly referring to human rights, whether or not they participate in the Global Compact. Most companies have a human rights policy apart from supplier codes of conduct or business policies for within the company. The UNGPs and individual corporations taking the UNGPs and other international instruments is indicative that international legal instruments are influential. But till such instruments are universally acceptable and enforceable, not just across corporations but also across States, the conflict between business and human rights is bound to endure.
* Stuti is a Masters of Laws graduate from Georgetown University Law Center where she focused her graduate level studies on the advancement of human rights.She is currently pursuing her doctoral degree at the School of Criminology and Criminal Justice at Northeastern University. She is primarily interested in identifying issues plaguing criminal justice systems across the world. In addition, she is also interested in finding ways to increase the access to justice, particularly the criminal justice system in developing countries.