human rights & business (and a few other things)

Lowering the bar (in a good way): the UK Supreme Court Decision in Okpabi v. Shell

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It is a pleasure to welcome back Dr Lucas Roorda as a guest poster on “Rights as Usual”. Dr Roorda (@LRoordaLaw)  is an Assistant Professor and postdoctoral researcher at Utrecht University. This post is his.

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Parent companies incurring common law duties of care to foreign claimants have gone from a distant hypothetical to a very real possibility. Two weeks ago, the Dutch Court of Appeal was the first court to hold on the merits that RDS, the parent company of the Shell group, incurred a duty of care to farmers in the Niger Delta. Now the UK Supreme Court (UKSC) has ruled in the case of Okpabi v. Shell that it is at least arguable that RDS had a duty of care towards the inhabitants of the Ogale and Bille communities, confirming its decision in Vedanta v. Lungowe, and allowing their case to proceed in English courts. In this blog I discuss the UKSC’s decision and its implications, and compare it to the Dutch Court of Appeals decision.

The background

I have discussed Okpabi case here and here, so I’ll refer to those blog posts for more detailed discussions of the facts and the lower courts’ decisions. The claims concern significant oil pollution in the Niger Delta, allegedly caused by Shell’s negligence in maintaining pipelines and other oil infrastructure – broadly similar to the Milieudefensie case in the Netherlands, discussed here. Also similar to that case is that the claims were jointly filed against Shell’s Nigerian subsidiary SPDC, and Anglo-Dutch parent company RDS. The defendants disputed the jurisdiction of English courts, arguing that the Nigerian claimants had no ‘arguable case’ against RDS, to which SPDC could then be a ‘necessary and proper party’. The defendants argued that the claimants’ claim that RDS had incurred a duty of care, pursuant to Caparo v. Dickman and Chandler v. Cape, had no prospect of succeeding, and was filed only as an anchor for the court to assert jurisdiction over subsidiary SPDC. Both the High Court and the Court of Appeal sided with the defendants. They held that the Nigerian claimants had insufficiently demonstrated that RDS could have incurred a duty of care and dismissed the case.

The decision of the UK Supreme Court

The UKSC has now reversed the Appeal decision, holding that the claim against RDS contains a sufficiently ‘triable issue’ and remitting the case to the High Court. In a unanimous decision delivered by Lord Hamblen, the Court first reiterates its holding in Vedanta v. Lungowe of last year that parental duties of care are not a distinct category of negligence liability, but instead are to be determined by ordinary principles of tort law (para. 25; see also para. 141-143). Thus, such duties are not governed by the stringent threefold test of Caparo v. Dickman (requiring foreseeable harm; proximity between the parties; and imposing liability is ‘fair, just and reasonable’) but rather by the broader guidance of Vedanta (note that the Dutch Court of Appeal also got this wrong, relying primarily on Caparo). The Court emphasizes that this guidance does not itself create new, distinct categories of liability but should be read as non-limitative and indicatory of the range of circumstances under which a duty of care can arise.

The bulk of the judgment concerns the Court’s assessment of the way the Court of Appeal assessed the level of control allegedly exercised by RDS. The Court had already noted in Vedanta that it would be inappropriate for courts to engage in ‘mini-trials’ in response to a challenge to jurisdiction over a foreign defendant. In Okpabi however, not only did the Court of Appeal fail to determine that the High Court’s ‘findings’ in fact constituted a mini-trial (paras. 110-111), but in reviewing those findings it engaged in a mini-trial of its own (para. 112). The Court of Appeal made several (inappropriate) determinations regarding the witness statements, factual evidence and documentation presented before concluding that no viable argument could be made that RDS had sufficient control over SPDC and incurred a duty of care.

On the documentary evidence specifically, the UKSC is highly critical of the Court of Appeal’s approach. The Court of Appeal had been wrong to scrutinize the documentary evidence to this degree, before the appellants had access to internal company documents through disclosure (paras 128-129). In fact, the UKSC notes, such documents are crucial to demonstrate operational control over a subsidiary (para. 134), and the appellants had even provided some they obtained through third parties (including audit reports submitted in the Dutch case). Rather than dismissing the case, the Court of Appeals should have concluded that the well-argued existence of such documents was sufficient to let the claimants move on to disclosure, and to be able to further substantiate their claims. Already for that reason, the Court overturns the Court of Appeal’s decision.

The Court further reiterates that the Caparo test was the inappropriate test for determining whether RDS could incur a duty of care. It also notes that the Court of Appeal focused too much of the issue of ‘control’ over the subsidiary and its entire operations; instead, a duty of care could result from various ways in which a parent company is involved in the management of the harmful activities (para. 147). This could be through active intervention, but equally as a result of flawed group-wide policies, or even when a parent company holds itself out to third parties to exercise control over its subsidiaries, but then failed to do so. With that in mind, the Court concludes that the appellants had indeed raised a ‘real issue to be tried’ as to whether RDS incurred a duty of care.

Analysis: the only reasonable outcome

From my perspective, this seems to be the only reasonable outcome. As I noted in my blog on that decision, the Court of Appeals had set the evidentiary bar for an arguable case that a duty of care existed so high that one could better speak of the claimants requiring a ‘winnable’ case; both with regard to the stringent test for a duty of care, and with regard to the evidence required to even present an arguable case. The Supreme Court now lowers the bar to a much more attainable level, preventing lengthy ‘mini-trials’ that drain time and resources of the parties as well as the courts seized, and providing victims with easier access to internal company documents. As noted by Ekaterina Aristova and Carlos Lopez in their excellent blog on the Okpabi judgment, the Court thereby takes an approach more in line with international jurisprudence: claimants can rely on publicly available documents to raise a legitimate issue on the level of control a parent company could exercise, and substantiate whether that indeed occurred in this case after disclosure. This is also the approach suggested by Sales LJ in his dissenting judgment, which I advocated for in my blog, and which is now explicitly endorsed by the Supreme Court (para. 155).

Whilst these holdings could already have a significant impact on future litigation, it is the Court’s confirmation of Vedanta regarding the circumstances under which a parent company can have a duty of care that is likely to spark more litigation. Most litigation of this type revolved around the Caparo test, modified by Chandler v. Cape regarding proximity – including, as noted, erroneously by the Dutch Court of Appeals in Milieudefensie v. Shell. Quite predictably, such litigation has yielded few results for claimants. The Court now confirms that a much broader range of circumstances and activities can create a duty of care, which makes it both easier to argue and adaptable to circumstances of different cases. Moreover, there is no principled reason to assume that a company purporting to exercise oversight over foreign contractors, and being in a position to do so in practice, could not also incur a duty of care with regard to harmful activities by that contractor, even if there is no formal control or ownership. It is regrettable that this holding came only after the Dutch Court of Appeals decision, which still relied on the Caparo test, despite the court referring to Vedanta as well.

Jurisdiction questions remain

We should be mindful of the limitations of this holding. The decision explicitly mentions that after remitting, other jurisdictional issues may still have to be dealt with by the High Court as they were not part of these proceedings. Amongst other issues, this includes Shell’s objections to an English court asserting jurisdiction over its Nigerian subsidiary SPDC. On this issue, Vedanta may actually aid the defendants more than the claimants. As I discussed here and here, the Supreme Court ruled that the risk of irreconcilable decisions no longer automatically means that cases against foreign co-defendants need to be litigated together with the main defendant (stating that it is no longer a ‘trump card’). In Vedanta, the risk of not getting substantive justice in Zambia however meant that the case had to continue in English courts.

This application of the forum non conveniens test may lead to a different outcome in Okpabi. Jurisdictionally, the situation is similar to Vedanta: the claimants themselves create the risk of parallel proceedings and irreconcilable judgments by electing to bring their case in English courts, whereas they could have litigated against both defendants in Nigerian courts. The claimants will thus have to show that no substantive justice is possible in Nigerian courts, which Shell disputes; in that respect, it can point to a number of recent decisions by Nigerian courts in favour of local communities and against Shell, to argue that prospects for the litigants there are much better than they would have been in Zambia for the Vedanta litigants. There would be a profound irony in this argumentation: not only has Shell repeatedly ignored rulings of Nigerian courts, but it also recently instituted investor-state arbitration proceedings against Nigeria, on the grounds that recent proceedings against the company had been unfairly conducted. So in essence, Shell’s argument is that Nigerian courts are good enough to litigate complex pollution cases, up until the point where the company loses.

Conclusion

Last month’s decision in the Milieudefensie case and the Supreme Court’s decision in Okpabi constitute major steps in ensuring that duties of care on parent companies can be plausibly argued before home state courts. Both the more realistic level of scrutiny a court should apply to such claims and the broadened scope of actions that can lead to a duty of care may mean that future claims arguing parent company liability become much more viable. Of course, the jurisdiction question still hangs over such cases, especially since the UK is no longer subject to the Brussels-I Regulation and forum non conveniens can be applied to claims against UK-domiciled parent companies.


Wading through the (polluted) mud: the Hague Court of Appeals rules on Shell in Nigeria

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It is a pleasure to welcome back Dr Lucas Roorda as a guest poster on “Rights as Usual”. Dr Roorda (@LRoordaLaw)  is an Assistant Professor and postdoctoral researcher at Utrecht University. This post is his.

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On 29 January, the Court of Appeals (Gerechtshof) of The Hague delivered its judgments in the case of Four Nigerian Farmers and Milieudefensie v. Shell. These judgments are of seminal importance for improving accountability of transnationally operating businesses for violations of human and environmental rights. This is because it is the first appeals case in Europe that resulted in a victory on the merits for the victims, but also the first case to hold that a parent company was under a duty of care with regard to foreign claimants. In this blog, I will summarize the judgment, address some key points and analyse its potential impact on future litigation.

Preliminary notes

The three judgments are over 150 pages, which is exceptionally long by Dutch standards. Here I focus on the merits of the case and have skipped the jurisdictional questions, discussed here and elsewhere on this blog. I have also not extensively examined the (failed) challenges of the defendant to various claimants’ standing, or Shell’s argument on the purported exclusivity of the Oil Pipelines Act (OPA). Lastly, I have limited discussion about the evidence provided by the parties, although to a large extent this case is about factual findings of the court.

Factual background and case history

The case concerns three separate incidents of oil spills in the Niger Delta, and the court delivered three separate but partially overlapping judgments. The first (‘Cases A and B’) concerns an oil spill from an underground pipeline near Oruma in 2005; the second (‘Cases C and D’) concerns an oil spill from an underground pipeline near Goi in 2004; the third (‘Cases E and F’) concerns an oil spill from a wellhead near Ikot Ada Udo. These spills caused severe damage to local farmlands and fishing grounds. The claimants were Nigerian (fish) farmers, who held both Shell Nigeria (SPDC) and its parent company Royal Dutch Shell (RDS) liable for negligent maintenance of the pipelines and wellhead, inadequate response to the spills and insufficient clean-up, thereby causing that damage. They were supported in their claims by Dutch NGO Milieudefensie (Friends of the Earth Netherlands).

The District Court of the Hague in 2013 initially only upheld one claim from Cases E and F, that of Friday Alfred Akpan (discussed here). It dismissed all other claims, accepting Shell’s defence that the respective spills were likely caused by sabotage, and rejecting liability of parent company RDS. After first issuing several interlocutory decisions, most importantly on jurisdiction and applicable law in 2015, the Court of Appeal has now reversed the holdings of the District Court. On 29 January 2021, it held SPDC liable for damage caused by oil spills in Cases A to D and ordered payment of damages to the claimants, the amount to be determined in a separate hearing (schadestaatprocedure). It also orders both SPDC and RDS to install a leak detection system (LDS) in the pipeline central to Cases A and B. In Cases E and F, the court issues an interlocutory decision ruling that these spills were caused by sabotage, but requests additional information from the parties on the extent of the damage and subsequent clean-up actions. In the remainder of this post, I will only discuss Cases A to D, the oil spills in Oruma and Goi.

Liability of SPDC

As per its 2015 interlocutory decision, the court applies Nigerian law to the case’s substantive questions. The claimants had primarily argued their case on the basis of the federal OAP, which outlines obligations for operators of oil infrastructure; and on common law torts, specifically the torts of negligence, nuisance and trespass to chattel. To determine the liability of SPDC for both spills, the court looks primarily at the OPA, SPDC being the operator of the pipelines in the sense of the OPA.

First, the court examines liability for causing the oil spills. It considers that art. 11(5)(c) OPA imposes a strict liability standard for operators of oil pipelines. The operator can be exempt from liability in cases of sabotage, which Shell argued was the most likely cause of the spills in Oruma and Goi. The court however holds that under Nigerian law sabotage should be proven beyond reasonable doubt, as was argued by the claimants. While the court notes that the available expert reports indeed suggested that sabotage was a likely cause of the spills, it holds that this does not meet the standard of ‘beyond reasonable doubt’. It thus concludes that SPDC could not evade the strict liability standard of art. 11(5)(c) OPA, and that it is liable for damages arising out of the spills. The court does not consider it necessary to examine liability for any of the common law torts. It considers obiter that in either case it would likely not have found SPDC liable on this basis, given that sabotage was still a likely cause of the spill.

Second, regarding Shell’s response to the oil spills, the court notes that art. 11(5)(c) of the OPA is not applicable and that the claims regarding the response should be assessed in light of common law torts, specifically negligence. In both cases (A and B; and C and D), the court finds that SPDC owed a duty of care to the claimants, and acted negligently in its response to the spills. In the case of the Oruma spill, SPDC was aware of the risk of spills and potential problems with on-site inspection following a suspected spill, yet neglected to install a ‘Leak Detection System’ or take other sufficient measures. This would have allowed a more immediate response to leaks and spills, even if access to the site was (temporarily) impossible. In the case of the Goi spill, the court notes that while SPDC did perform an on-site inspection by helicopter to assess the leak, this could have been done at least a day earlier. The court additionally orders that SPDC should install an LDS system in the Oruma pipelines to prevent future spills; it had already done so in the Goi area in 2019.

Lastly, the court discusses the clean-up undertaken by Shell after the spills. Here, the court finds that while there was still some pollution in both regions, the duty of care Shell had to ensure adequate clean-up did not extend beyond the actions it had already undertaken, as assessed by applicable industry standards. The court also dismisses the claimants’ arguments that the remaining pollution constituted a violation of the farmers’ right to a clean environment, leaving aside whether such a right could be horizontally invoked under Nigerian law.

Liability of RDS

The court examines whether Royal Dutch Shell, parent company of the Shell group, is also liable for the oil spills. Such liability can be based on English precedent, which the court notes has persuasive authority in Nigeria’s common law system. The question is then whether the parent company also owed a duty of care to the claimants. A duty of care can be incurred if the company is in sufficient proximity to the claimants, for example by intervening in its subsidiary’s operations, and if imposing that duty is ‘fair, just and reasonable’. As the court notes, the UK Supreme Court confirmed in Vedanta v. Lungowe that parent companies can owe a duty of care to persons affected by harmful activities of foreign subsidiaries.

The claimants had argued that RDS, through its position in the Shell group and interventions with its Nigerian subsidiary, had incurred a duty of care, but the court dismisses this argument with regard to causing the spills. It notes that for a parent to incur a duty of care, the subsidiary must have acted wrongfully. However, as seen above, the court did not find that SPDC had acted wrongfully. Instead, it found that SPDC incurs strict liability as an operator under the OPA. With regard to the response to the spill, the court does find a limited duty of care. Based on internal documents, bonus policies and a witness statement, the court concludes that after 2010 RDS was actively trying to limit the amount of oil spills in SPDC’s operations, amongst other things by installing Leak Detection Systems (LDS) in its pipelines. The court thus finds that with respect to the installation of an LDS in the Oruma pipeline, where it had not been installed at the time of the proceedings, RDS had a duty of care to the claimants. It orders Shell to insure it is installed within a year.

Small steps, giant leaps

The Court of Appeals’ judgment is a monumental victory for the victims and their communities, and by extension for Milieudefensie. The court found in their favour on two of the three central issues after over a decade of litigation and uncertainty, although the finding that Shell conducted adequate clean-up after the spills must be disappointing. Whether this will actually result in an award that is sufficient to cover the personal and economic losses incurred both directly after the spills and in the decade since then remains to be seen, but it certainly appears that the award will be more than symbolic. Not that this case is devoid of symbolism: it is the first foreign direct liability case to result in an enforceable decision on the merits, in favour of the claimants. All comparable cases have either been dismissed, settled or are still being litigated. That alone signifies how impactful this case may be, and what a big leap it is towards more corporate accountability.

Moreover, this case is the first case where a parent company was found to owe a common law duty of care to claimants residing in a third state, specifically local communities affected by its subsidiary’s operations. English courts had contemplated this possibility in Connelly v. RTZ and Lubbe v. Cape, and the UK Supreme Court confirmed this in Vedanta v. Lungowe. Until this case, however, no court had concluded on the merits that a parent company was in sufficient proximity to its employees or local communities to incur such a duty. This holding thus staves off the fears that transnational corporate duties of care are a mere hypothetical, theoretically possible but never actually occurring in the real world. In my view, this is potentially the most lasting aspect of the case.

While of course enormously important to the victims, the court’s findings regarding SPDC’s liability are of limited legal relevance to other ongoing and future cases. These findings mostly concern the particular rules (the OPA) and facts (Shell’s actions regarding the spills) of this case. This is not a point of criticism: in a case as complicated and contentious as this one, it is sensible for the court to keep its ruling (if not its word count) relatively narrow. It does mean that in a different case, say in a different country with different local laws, concerning a different industry with different operational policies, or concerning even slightly different facts, the outcome may be completely different to this case.

Even the court’s finding of a parental duty of care, while significant, should be approached with some caution. It is of course only relevant for cases where the applicable law is the common law and English precedent can be applied. The way the court then applies that precedent is arguably problematic, specifically where it sides with Shell in holding that the subsidiary must itself have committed a tort before the parent can incur a duty of care. This does not follow directly from the English cases cited by the court, nor does the court clarify why finding that SPDC was subject to strict liability with regard to oil spills precludes a duty of care for RDS. Where it does find a duty of care, that finding stems from RDS’ specific interventions in SPDC’s operations after 2010, rather than from its central position of authority in the corporate group. I have argued on this blog before that finding a duty of care based on actual interventions of the parent, rather than its capacity to intervene, could create an incentive for parent companies not to interfere with their foreign subsidiaries (or only very generally), as this could potentially lead to liability later.

Separately, it must be noted that the proceedings took so long – 16 years since the first spill, 11 years since the litigation started – that several initial claimants passed away before this decision was issued, and litigation was continued by their next of kin. Part of this duration is inherent to the complexity of this case, part of this is arguably due to Shell dragging out the litigation, by arguing procedural points and being slow to produce internal documents requested by the claimants. It is of course fully within Shell’s rights to litigate potentially far-reaching issues like jurisdiction, and the court itself also requested a significant amount of additional evidence to be produced. What is certain is that the length of procedures like this disproportionately works to the detriment of individual claimants, as is painfully demonstrated by this case.

Conclusion

This decision takes a notable step towards more corporate accountability for human rights and environmental impacts. It was rightly celebrated, not just by the victims in this procedure who waited 13 years for a proper remedy, but also in the wider communities of the Niger Delta. As I pointed out in this blog, several significant legal and practical questions remain, from the availability of information necessary to viably argue a case to the precise extent of parental duties of care. But this outcome may well bolster other victims to bring their cases before home state courts, and push the trend towards more corporate accountability further forward.


The UNGPs and the Future of Business and Human Rights Regulation – Interdisciplinary Workshop at Martin Luther University Halle-Wittenberg

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It is a pleasure to welcome Dr René Wolfsteller on Rights as Usual. René holds a PhD in Politics from the University of Glasgow. He is a Lecturer in the Department of Political Science and associated Research Fellow of the Research Cluster “Society and Culture in Motion” at Martin Luther University Halle-Wittenberg, Germany. His research focuses on the institutionalization of international human rights norms, business and human rights, and national human rights institutions. His work has been published in the Journal of Human Rights, the International Journal of Human Rights, and in Leviathan. This post is his.

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On 13 February 2020, I organized an interdisciplinary research workshop at Martin Luther University Halle-Wittenberg (Germany). The workshop brought together leading experts in the field of business and human rights from law, politics, ethics and critical accounting studies, to analyze the conceptual foundations and effectiveness of the transnational regulatory regime that has emerged since the endorsement of the Guiding Principles on Business and Human Rights (UNGPs) by the UN Human Rights Council in 2011.

Funded by the Forum for the Study of the Global Condition and the Research Cluster Society and Culture in Motion, the workshop yielded three key insights.

(1) The governance potential of the emerging business and human rights regime is far from exhausted.  There continues to be an urgent need for internationally coordinated, enforceable standards.

 (2) The normative foundations of this regime need to be developed further, yet without giving business actors the opportunity to dilute the meaning of human rights norms and standards beyond recognition.

(3) Business and human rights research is complex, and this complexity can only be adequately addressed through the combination of different disciplinary perspectives, as exemplified by the thematic variety of the contributions and the insightful comments of participants.

In my welcome address, I pointed to the potential opening of a new window of opportunity in Europe where leading political actors have expressed an interest in strengthening business and human rights regulation and introducing enforceable safeguards against business-related rights abuse.

Before turning to these empirical issues, the workshop began by discussing the normative and theoretical foundations of the emerging business and human rights regime. Yingru Li and John McKernan (University of Glasgow) opened the first panel with a paper criticizing two major shortcomings in the construction of the UN Guiding Principles from the standpoint of moral philosophy. First, they contended that the UNGPs do not sufficiently allow for the active participation of civil society actors in their further development and implementation. Second, the UNGPs miss what the authors identified as the most fundamental point of human rights, that is, their potential to serve as an instrument for emancipatory struggle. Joining the normative debate, Elke Mack (University of Erfurt) argued in her presentation that the moral legitimacy of the global market economy cannot be derived from mere compliance with human rights law alone. In her view, it is necessary also to underpin economic globalisation with the construction of social contracts between corporate and societal actors on a micro-level, in order to ensure a mutual economic and social benefit based on liberal and cosmopolitan values. In the third contribution to the panel, Christian Scheper (@ChrisSchep, University of Duisburg-Essen) highlighted the risk of empowering business enterprises further as an unintended consequence of their increasing regulation. In fact, the stronger regulation of businesses may contribute, according to Scheper, to companies’ increasing epistemic influence and political power over the knowledge production on business behaviour as the regulatory system relies so heavily on corporate self-reporting and self-measurement.

Following this note of caution, the second workshop panel examined the implementation of corporate human rights accountability and due diligence through different state-based mechanisms. Kelly Kollman and Alvise Favotto (University of Glasgow) presented a study of the effects of the UK National Action Plan for Business and Human Rights on corporate human rights accountability of 50 transnational companies based in Britain. Although their analysis of the companies’ CSR reports from 1995 to 2015 and of original interview data revealed a small increase in the engagement with human rights issues, Kollman and Favotto expressed scepticism on whether substantive progress has been made, especially since the companies’ engagement was largely limited to the level of rhetoric and management. In the following presentation, I examined the potential and the challenges of National Human Rights Institutions (NHRIs) to contribute to the promotion and protection of human rights in relation to business actors. Pointing out the divergence between the high expectations put on NHRIs and the structural challenges inhibiting these institutions to engage with business actors effectively, I identified the weak mandate under international law and the lack of adequate powers as the two main factors preventing NHRIs from unfolding their full potential.

In the third panel, the discussion turned to the specifically legal challenges in holding businesses accountable for human rights abuses. Analysing international law and legal doctrine, Markus Krajewski (@KrajewskiMarkus, Friedrich Alexander University Erlangen-Nuremberg) reconstructed a wide-ranging duty of so-called “home states” to protect individuals from human rights abuses by transnationally operating business enterprises based within their jurisdiction. According to Krajewski, this home state duty extends also to the protection of individuals affected by the operation of the parent company in other countries if the rights abuses were foreseeable and preventable. In the following paper presentation, Başak Bağlayan (@basakbc, University of Luxembourg) analyzed the role of National Contact Points (NCPs) in OECD member states in the realisation of the UNGPs’ second pillar by providing access to remedy. While Bağlayan recognised the potential of NCPs, she argued that the diversity of their form, powers, and funding, as well as of the remedial procedures offered by them, made it difficult to consider these institutions per se an effective mechanism for the provision of access to remedy for victims of business-related rights abuse. Almut Schilling-Vacaflor (University of Osnabrück) concluded the law panel with a paper examining the effectiveness of the French vigilance law of 2017 which imposes relatively extensive due diligence duties on transnational firms based in France. With a case study of the activities of the French-based oil and gas company Total in Bolivia, Schilling-Vacaflor showed that in legal practice it is extraordinarily difficult to enforce this supposedly progressive law effectively under the conditions of globalised production processes because of the high burden of proof and unclear jurisdictional competences of national courts.

The final panel was dedicated to a possible future binding treaty on business and human rights which is being negotiated since 2015 by the Open-Ended Intergovernmental Working Group on Transnational Corporations and Other Business Enterprises With Respect to Human Rights (IGWG) in Geneva. Nadia Bernaz (@NadiaBernaz, Wageningen University) set out the advantages and limitations of different conceptions of corporate accountability for human rights to be adopted by a future treaty. Eventually, Bernaz made the case for a progressive model of corporate accountability which would combine the development of existing principles of international law with state-based enforcement mechanisms. Janne Mende (Justus Liebig University Giessen) closed the workshop with an analysis of the struggle over authority in the treaty negotiations of the IGWG. Based on original interview data and documents, Mende argued that contestations over the authority and legitimacy of actors do not necessarily lead to resistance and crises in the negotiation process but can also pave the way for new hybrid solutions, as illustrated by the recent treaty draft from October 2019.


Report of the IACHR on Business and Human Rights: towards the Inter-Americanization of Business and Human Rights

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It is a pleasure to welcome Salvador Herencia-Carrasco on Rights as Usual. Salvador is the Director of the Human Rights Clinic of the Human Rights Research and Education Centre at the University of Ottawa. E-mail: shere045@uottawa.ca Twitter: @Sherencia77.  This post is his. Disclaimer: in October 2018, he attended a closed session in Mexico to discuss an early draft of the report.

 

In January 2020, the Special Rapporteurship on Economic, Social, Cultural and Environmental Rights of the Inter-American Commission on Human Rights (IACHR) published its long awaited report, “Business and Human Rights: Inter-American Standards”. Created in 1959 by the Organization of American States, the (IACHR) has jurisdiction to promote human rights over all 35 member states of this regional organization. This includes countries that have not ratified the ACHR like Canada, the United States and most of the Caribbean nations.

While we wait for the English version of the report to be released, the purpose of this post is to identify its key elements, and to discuss what this publication means for the Business & Human Rights (B&HR) field in the Americas. By providing a strong focus on the rights to due process and access to justice of victims, this report can be seen as an attempt by the IACHR to link the United Nations Guiding Principles on Business and Human Rights (UNGP) to the American Convention on Human Rights (ACHR). This “inter-americanization” of the UNGP could translate into concrete obligations for states, including adopting legislation and policies on B&HR, and eliminating legal barriers that limit access to courts by victims of corporate abuse.

The first part of the post shows how the main B&HR focus in the Inter-American Human Rights System (IAHRS) has been on mining companies so far, and how in its new report the IACHR identifies other fields of concern. In doing so, they “de-extractivize” the B&HR discussion in the Americas. The second part explains how the IACHR interprets the duty of the state to protect people from corporate abuses and how this could change how we use the UNGP in the IAHRS.

Business and Human Rights and the Inter-American Human Rights System: Going beyond Indigenous Peoples and Extractive Industries

 The IAHRS has played a significant role in assessing the impact of extractive industries on Indigenous Peoples, particularly on the violation of the rights to land, territory, consultation as well as free, prior and informed consent. Since Awas Tingni vs. Nicaragua, decided by the Inter-American Court of Human Rights (IACtHR) in 2001, the other 20+ cases on this field -including landmark cases of Saramaka vs. Suriname and Sarayaku vs. Ecuador- all have similar circumstances: a state authorizes an extractive corporation (usually mining) without any consultation with Indigenous Peoples who live in that area and who are the rightful owners of that land.

In the B&HR spectrum, these cases –despite focusing on state responsibility – have showed how mining permits are obtained, usually by presenting false documentation, bribing corrupt officials or benefiting from loose regulations. To complement these judicial standards, the IACHR published the report “Indigenous Peoples, Afro-Descendant Communities and Natural Resources: Human Rights Protection in the Context of Extraction, Exploitation, and Development Activities in 2016. This was the IACHR’s first attempt to identify the B&HR obligations of states in the extractive sector.

The new report “Business & Human Rights: Inter-American Standards” has sections on Indigenous Peoples and mining companies (paras. 339-351) but it goes beyond the extractive industry. It identifies other topics of interest like transitional justice and the responsibility of businesses for gross violations of human rights (paras. 200-218), climate change (paras. 232-252) and the privatization of public services (paras. 219-231), among others.

Due process and access to justice as the key for victims to seek a prompt recourse for Business and Human Rights abuses

 The main scope of the report is the first pillar of the UNGP, which addresses the state duty to protect human rights. And that is clear throughout the 224 pages of the report. With the exception of chapter 4, the report emphasizes on obligations of the state vis-à-vis the first pillar.

At first glance, this could be seen as a missed opportunity because more analysis is needed on how to understand the second pillar of the UNGP, particularly within the IAHRS. However, a closer look at the report provides valuable guidance regarding the responsibilities of companies. For example, the report mentions how corruption and corporate interests have limited the capacity of states to fulfill human rights obligations (paras. 53 and 130), and points to the limitations of corporate social responsibility programs to effectively prevent human rights abuses (para. 134).

The IACHR report establishes from the start that the state has the primary duty to fulfill the UNGP. This includes the state’s (i) duty to adopt laws and policies; (ii) duty to prevent violations to human rights caused by business activities; (iii) duty to monitor/inspect businesses; (iv) duty to investigate, prosecute and repair victims (para. 85).

These duties correspond to the general human rights obligations found in Art. 1, Art. 8 and Art. 25 of the ACHR. For the B&HR discussion, paras. 133-139 of the report are important because they show the limitations of forum non conveniens and how inequality of arms between corporations and victims affects judicial proceedings at the national level. For those working on B&HR, this is not new. However, it is important to read this report from the point of view of the IACHR, particularly in its capacity to take cases against states to the IACtHR.

In practical terms, the IACHR –in my view- is carefully stating that it would be open to bring cases against home and/or host states to the IACtHR, as long as these are party to the ACHR. The IACHR is indicating that forum non conveniens and corporate veil are being used by businesses to prevent victims from accessing a prompt recourse. In my understanding of the report, the IACHR is suggesting that these are not protections but barriers that will not be opposable to IACHR while assessing a complaint.

Conclusion

This new report comes at a time of significant jurisprudential changes within the IAHRS. In December 2017, the IACtHR adopted the Lagos del Campo vs. Peru case, determining that economic, social and cultural rights are autonomously protected under the IAHRS. This opens a wide array of possibilities for B&HR litigation, allowing us to assess the impact that business activities might have on health or safety in the workplace. In 2020, the IACtHR should decide on a case related to an explosion of a factory in Brazil due to poor working conditions and on another case related to the impact of privatization of health insurance policies to the right of health in Chile.

In addition, the 2017 Advisory Opinion OC-23/17 on the Environment and Human Rights by the IACtHR establishes specific requirements on human rights and environmental impact assessments. In addition to this new judicial standards, the IACHR has recently published its report on “Corruption and Human Rights”(currently just available in Spanish). Of relevance to the B&HR discussion, this report goes beyond the adoption of criminal laws, highlighting the impact that corruption by businesses has on vulnerable populations.

Despite these relevant developments, legislation and the case law on B&HR in the Americas remain scarce. Many Latin American countries are still prioritizing developing National Action Plans or cases related to Indigenous Peoples. The report aims to broaden the scope by identifying how human rights abuses by businesses affect vulnerable populations (paras. 312-406) while also recommending states to prioritize due diligence legislation (paras. 103-119) and to implement extraterritorial obligations of home states (paras. 146-174).

The main challenge of any thematic report from the IACHR is how to fulfill its recommendations. I read the report as a set of tools to allow CSOs, victims and academics to work together to make “Inter-Americanization” of B&HR a reality.


UK NCP Takes Step Towards Strengthening Multi-stakeholder Initiative Accountability

sugar

It is a pleasure to welcome Dr Rachel Chambers to Rights as Usual. Rachel is a Postdoctoral Fellow in Business and Human Rights at the University of Connecticut and serves on the steering committee of UConn’s Business and Human Rights Initiative. Her research centres on access to remedy through judicial and non-judicial mechanisms, non-financial reporting and human rights due diligence. She is a Barrister (England and Wales). This post is hers.

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On 25 September 2019 it was announced that the UK National Contact Point (NCP) has decided to accept a complaint regarding the actions of sugar industry multi-stakeholder initiative (MSI) Bonsucro as admissible and offer mediation to the parties. This decision forms part of a welcomed trend of greater acceptance of complaints by the UK NCP. It is also the second complaint about an MSI to be accepted by an NCP – the first being a complaint against the Roundtable for Sustainable Palm Oil (RSPO) that was the subject of a final statement by the Swiss NCP last year. This is an important development that will enhance the accountability and ultimately the strength and legitimacy of MSIs.

The UK NCP’s Record of Accepting Complaints

 The OECD NCP is a non-judicial mechanism intended to hold companies to account over breaches of the OECD Guidelines for Multinational Enterprises, an international standard set by the OECD on labour rights, human rights, the environment and corruption, among others. To-date, 46 governments have adopted the Guidelines, and the prominence of this mechanism has been widely acknowledged (see previous posts on this blog about NCP cases here and here). For example, in June 2015 the G7 leaders made a declaration calling for the strengthening of NCPs in the context of providing access to remedy.

The UK NCP has a good reputation, particularly since 2008 when its processes were strengthened. A complaint is brought by filling in a form which is available on the NCP’s website. The NCP offers professional mediation in suitable cases and, where mediation fails or is not taken up by the parties, examination of the complaint and determination of whether or not the Guidelines have been breached. There is follow up by the NCP a year after examination of a complaint to assess progress on the issues raised.

However, in recent years the UK NCP has been the subject of criticism. An Amnesty International report from 2016 charted the decline in the NCP’s performance in the period from 2011 (see my earlier blog). OECD Watch wrote an open letter to the UK NCP in early 2018 in an attempt to restore civil society’s confidence in the NCP.

One of the primary criticisms of the NCP was that it was rejecting too many complaints at the initial assessment stage, by imposing an unreasonably high burden of proof. The OECD’s Procedural Guidance merely tells an NCP to ‘determine whether the issue is bona fide and relevant to the implementation of the Guidelines’.

A quick survey of complaints considered by the UK NCP since the Amnesty report reveals that relatively few have been brought in that period, no doubt reflecting the lack of confidence civil society felt in the process. However, of the seven complaints brought, five have been accepted for mediation. The last time a complaint was outright rejected at the initial assessment stage was three years ago, in November 2016. The NCP did, however, reject complaints against two of three companies named in complaints last year. The tenor of decisions is less strict when it comes to the evidentiary threshold, however. In one decision, the UK NCP noted a distinct lack of detail in the evidence, but stated nonetheless:

(…) the initial assessment process is to determine whether the issues raised merit further examination. It is not an assessment of the likely outcome of any further examination. It is on this basis that the UK NCP has considered the complaint.

The Complaint against Multi-stakeholder Initiative Bonsucro

 The complaint against Bonsucro alleges that the MSI failed to conduct adequate due diligence and apply leverage to its member Mitr Phol Group – Thailand with regard to alleged human rights violations: the forced evictions of hundreds of Cambodian families to make way for sugar cane plantations. The complainants also allege that Bonsucro does not have in place adequate human rights policy commitments and an effective grievance mechanism in line with the OECD Guidelines. The complainant NGOs produced evidence both of the forced evictions in Cambodia and of the lack of human rights policy. Thus, on an evidentiary level, this case was easier to get off the starting blocks than many. More challenging, potentially, was the need to convince the UK NCP to accept a case against an MSI – not the usual target of complaints under the OECD Guidelines, despite the Swiss precedent in the RSPO complaint.

The multi-stakeholder initiative (MSI) approach to business regulation emerged from the 1992 Rio Summit (UN Conference on Environment and Development). It consists of multiple stakeholders (usually business and civil society, along with others, including governments, universities and/or investors) working together to solve complex problems in the field of business and human rights. Although praised as a step forward from corporate self-regulation, MSIs are being increasingly assessed for their performance and critiqued, particularly when they fail to hold their corporate members to account for human rights violations.

The issues that underlie the Bonsucro case had previously been raised in a complaint brought under the MSI’s own grievance mechanism in 2011. Bonsucro dismissed the complaint on the grounds that it did not receive cogent evidence of a breach of its code of conduct.

At the OECD Guidelines initial assessment stage, Bonsucro argued that the UK NCP was not the appropriate forum for the complaint to be heard, asserting that the real issue was with its member company, and that Bonsucro should not be used as a conduit for this complaint.

The UK NCP gave short shrift to these arguments, finding that Bonsucro falls within the loose definition of an MNE from the Guidelines, and that it was appropriate for the NCP to consider alleged human rights violations that are linked to a company’s operations, products or services by a business relationship (i.e. the membership relationship between Mitr Phol Group- Thailand and Bonsucro). This outcome was hailed as a success by one of the complainant NGOs. The UK NCP will now offer the parties an opportunity to mediate the issues, or if mediation fails, it will examine the claim that Bonsucro’s actions are inconsistent with the Guidelines.

It is hoped that the mediation will be productive and, if not, that the UK NCP will use this opportunity to clarify the OECD Guidelines’ role in enhancing the accountability and ultimately the strength and legitimacy of MSIs. The Bonsucro decision should also be placed in its wider context, i.e. the practice of the Swiss NCP, who besides the RSPO, has held complaints against FIFA (formally an association under Swiss law) and WWF admissible. With two separate NCPs going in the same direction, the role of business and human rights standards to strengthen the accountability of non-state actors operating transnationally is now open for discussion. In an upcoming article they presented at the Business and Human Rights Scholars Association Conference in September, Domenico Carolei and Nadia Bernaz bring this question to the fore.


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