Human rights and transnational corporations: the way forward
A summary of discussion at the International Law Programme Discussion
Group at Chatham House on 7 June 2005; participants included
representatives from business, law firms, academics, and representatives from
government departments.
This summary is issued on the understanding that if any extract is used,
Chatham House should be credited, preferably with the date of the meeting.
High Commissioner’s Report
A speaker summarised the report of the Commissioner of Human Rights on the
responsibilities of transnational corporations and related business enterprises with
regard to human rights of 15 February 2005 (E/CN.4/2005/91). The report reviewed
existing initiatives and standards and compared their scope and legal status, in
particular the ILO Tripartite Declaration of Principles concerning Multinational
Enterprises and Social Policy, the OECD Guidelines for Multinational Enterprises, the
United Nations Global Compact, and the draft Norms on the Responsibilities of
Transnational Corporations and Other Business Enterprises with regard to Human
Rights (draft Norms).
The report makes three general assumptions. The first is that business has to
operate in a responsible manner, including through respecting human rights. Many
businesses have already adopted voluntary guidelines and codes of conduct.
Secondly, business can provide an enabling environment for the enjoyment of human
rights through investment, employment creation and the stimulation of economic
growth. But the activities of business have threatened human rights in some
situations and individual companies have been complicit in human rights violations..
Thirdly, the review of existing initiatives and standards on business and human rights
indicates that there remains a gap in understanding the nature and scope of
responsibilities of business with regard to human rights.
The report mentioned difficulties in identifying what the responsiblities of business
are (that is, their responsibility to respect and to support human rights, and not to be
complicit in human rights abuses), in identifying what are the boundaries of those
responsibilities (the question of “sphere of influence”), in identifying which human
rights business is responsible for, and in determining how the responsibilities of
business could be guaranteed. Further questions were whether there should be a
United Nations statement of universal standards setting out the responsibilities of
business entities with regard to human rights, what would the legal nature of those
responsibitlies be and what tools were needed to promote respect for human rights
within the activities of business.
The report had identified two concepts for further analysis: the concepts of complicity
and sphere of influence. There was a need for continued dialogue and consultation
among all stakeholders. The report also identified a wish to discuss further the
possibility of establishing a United Nations statement of universal human rights
standards applicable to business. But what legal force would such a statement have?
The speaker emphasised that the report had reiterated that states bore the primary
responsibility for human rights. The report had suggested that assistance should be
given to states in the area of business and human rights and a compilation of best
state practice was needed. But this aspect was not included in the final
recommendations.
Resolution
The speaker explained that there had been a great deal of debate at the Commission
in Geneva, but a resolution had finally been adopted (E/CN.4/2005/L.87). The
resolution had recognised that transnational corporations and other business
enterprises can contribute to the enjoyment of human rights. The resolution had
requested the UN Secretary-General to appoint a Special Representative on the
issue of human rights and business with the following mandate (to which the speaker
added comments - in square brackets below):
(i)
to identify and clarify standards of corporate responsibility and
accountability for transnational corporations and other business
enterprises with regard to human rights; [it was intentionally left
ambiguous as to whether this covered existing or new standards]
(ii)
to elaborate on the role of states in effectively regulating and
adjudicating the role of transnational corporations and other business
enterprises with regard to human rights, including through
international cooperation;[no distinction is made here between host
state and home state of the business concerned]
(iii)
to research and clarify the implications for transnational corporations
and other business enterprises of concepts such as ‘complicity’ and
‘sphere of influence’;
(iv)
to develop materials and methodologies for undertaking human rights
impact assessments of the activities of transnational corporations and
other business enterprises;
(v)
to compile a compendium of best practices of states andtransnational
corporations and other business enterprises.
Other aspects of the resolution to which the speaker drew attention included the
recognition that many submissions had been made to the High Commissioner which
had not been specifically reflected in the report, and the Special Representative was
asked to take these into account. The Special Representative was asked to consult
with all stakeholders. And s/he was also asked to convene sector-specific meetings
with industries. The speaker considered that there were now three principal
questions: to what extent are the existing standards adequate; if they are, should
there be better presentation of them; if not, what should be the next steps? What are
the roles of the host and home states for ensuring responsible behaviour by
companies? What scope is there for research on complicity and sphere of influence?
Business
Another speaker stresssed that states are the principal duty-bearers of human rights;
there was a risk of letting states off the hook; business should not be made to be
surrogate governments. There was a slight disconnect between the report and the
resolution, but from the point of view of business, the resolution was good, and
avoided the polarisation that occurred after the draft UN Norms had been presented.
There was no reference to a non-international framework in the resolution. There
were now many initiativesin the area. It was important that the Special
Representative to be chosen should be one who could command support from all the
stakeholders.
The US business community probably had a similar attitude to that of the UK: the
process deserves support, there is no support for the UN draft norms; there should
be no monitoring by reference to those norms; they have no legal standing. There
were many problems with the norms; too much had been claimed for them; the
process had been wrong. For the future things should be done in an open and
inclusive manner.
It was noted that the debate had largely taken place between stakeholders from the
developed world. It had been found difficult to engage the developing world; it was
necessary to ensure that local businesses in the developing world had their full say.
The report had concluded that there was a need to consider ways to include more
effectively the views and opinions of States and stakeholders from developing
countries.
The use of civil litigation
A speaker introduced a project being carried out at Chatham House; a number of the
issues being addressed were identified for further investigation in the report of the
High Commissioner.
The project was looking at how the existing private civil claims structure works
internationally with reference to harm which might be caused by a transnational
corporation in a developing country. There was no question of the project
encouraging the irresponsible pursuit of speculative claims.
The project focused on private civil compensation claims, which are enforceable
by individuals, not state agencies, and it concerned the existing system for
enforcing private rights transnationally, not an entirely new system. While the
language of human rights was not used, the project covered much of the same
ground. It looked at tort– type claims of harm to the person, and to their property from
industrial processes, products, and working conditions, trespass to the person (these
more in the context of the extent to which a company can be liable for the conduct of
its associates), economic torts and abuse of dominant position in competition law in
the trading context. It examined how the management structure of a TNC might
affect the claims against it, in particular management lines running across a group,
and the problem when it is associates which are the cause of harm, such as
suppliers, contractors and joint venture/consortium partners and the circumstances in
which a TNC might be held liable for the harm caused by those associates. This
relates to the “sphere of influence” and “complicity” issues. This raises difficult issues
under UK law relating to the circumstances in which a person, including a company,
owes a duty of care to people who have suffered as a result of action by
others,causation, joint liability of one kind or another and attribution of the knowledge,
acts or omissions of one individual to different companies within a group. There were
consultations ongoing as to the legal and de facto relationships which might be
typical of the sort of organisation which causes harm in this respect, and what
considerations might be relevant to the fairness and equity part of the duty of care
debate.
There was a separate set of problems relating to damage to the environment as
ecosystem where there is no human victim to claim recompense and another relating
to damage to people’s livelihoods, where there is the problem of the difficulty of
recovering for economic loss in negligence.
The methodology being used to map, or illustrate, the existing system is to use
fictitious case studies taking different types of harm, group management structures
and relationships with associates, and jurisdictions. Although the issues of
jurisdiction, governing law and cause of action can be considered in the abstract, in
practice they do not operate separately, and the case studies will illustrate what the
result is in practice.
The governing law for the cause of action under UK law (Private International Law
(Miscellaneous Provisions) Act 1995) will prima facie be the law of the developing
host country, although there is a possibility of applying UK law to the matter, or to
some issues, where it is “substantially more appropriate” or where the application of
overseas law conflicts with principles of public policy, so the project is seeking advice
on the law of selected developing countries. There will be similarities between
causes of action under common law systems. We also want to look at the position
from the perspective of other developed countries, including the US (where, of
course, there is the Alien Tort Claims Act, which has caused a great deal of
controversy), and European countries such as Germany and France.
The project is looking at transnational enforcement– a transnational corporation
operating across borders raises the question of where disputes relating to its
activities should be heard, and whether it can or should be heard in the courts of its
home state. The possibility of having a claim heard in courts other than those of the
developing country has particular importance where the developing country has an
undeveloped or corrupt legal system.
In Europe, the courts of the jurisdiction where a company has its registered office,
central administration or principal place of business have jurisdiction over claims
against it wherever the activities out of which the claim arises took place. A recent
case has confirmed that the Brussels Convention/Regulation means that the
defendant may no longer apply to stay proceedings in the UK on the grounds that
another forum is more appropriate (the forum non conveniens argument) even where
the claimant is not from another EU member state. The only exception to this which
is likely to be relevant (and even this is not certain) is where proceedings between
the same parties and on the same subject have already been commenced
elsewhere. This means that a claim against UK parent company will be heard in the
UK. Moreover, if the UK court has jurisdiction over one defendant, it will permit the
joinder of other overseas defendants. The requirements are that there is a real issue
to be tried between the claimant and the first defendant, that the overseas defendant
is a “necessary or proper party” to the claim and that the claims can conveniently be
disposed of in the same proceedings.
The project will also consider issues of access, or the reality of actually pursuing
these claims in home state courts. Funding is likely to be a major issue, as is access
to information to get a claim off the ground.
The High Commissioner’s report had not discussed the scope for domestic litigation,
other than by implication, in assuming that there may not be a possibility for access
for justice in developing countries.
There was a question as to whether the project was also covering the human rights
responsiblities of transnational companies based in countries other that the West, for
example, China, India and Brazil. What prospects could there be for civil litigation
such as this being carried forward in Chinese courts?
There was agreement that any project or process in this subject area should have a
properly constituted multi-stakeholder process to allow the issues to be fully
addressed.