{"id":9904,"date":"2023-04-01T12:00:16","date_gmt":"2023-04-01T16:00:16","guid":{"rendered":"https:\/\/journals.law.harvard.edu\/ilj\/?p=9904"},"modified":"2023-09-29T18:38:43","modified_gmt":"2023-09-29T22:38:43","slug":"evolution-of-business-human-rights-obligations-from-soft-law-to-voluntary-initiatives-to-emerging-international-standards-national-regulations","status":"publish","type":"post","link":"https:\/\/journals.law.harvard.edu\/ilj\/2023\/04\/evolution-of-business-human-rights-obligations-from-soft-law-to-voluntary-initiatives-to-emerging-international-standards-national-regulations\/","title":{"rendered":"Evolution of Business & Human Rights Obligations \u2013 From Soft Law to Voluntary Initiatives to Emerging International Standards & National Regulations"},"content":{"rendered":"

PATRICK MILLER & KABIR DUGGAL*<\/a><\/span><\/strong><\/p>\n

Introduction<\/h1>\n

Milton Friedman famously stated that a business has no purpose except to increase shareholder value. This approach is increasingly dying.[1]<\/sup><\/a>\u00a0Most international commercial lawyers have a general sense of human rights law\u2014though it is often dismissed as a collection of non-binding, aspirational pronouncements having little practical effect on the way business is conducted or how businesses advise their clients. Indeed, human rights law in international law is often understood as obligations of states in relation to humans with a limited role for business. As a result, businesses often have only a passing understanding of the legal regimes related to business and human rights (\u201cB&HR\u201d).<\/p>\n

Businesses which are not steeped in these issues can be forgiven for assuming that regimes related to B&HR are limited to the non-binding, aspirational arena, particularly as this may have been true for a time. On the one hand, we see an increased focus on Environmental, Social, and Governance (\u201cESG\u201d) obligations, although these tend to be non-binding or aspirational. At the same time, we notice the creation of hard law obligations which are enforced by national governments.<\/p>\n

Inquiries into corporate misconduct in the 20th<\/sup> century rarely went beyond the question of whether corporations even had a duty to protect human rights. The international conventions described below were landmark milestones in setting out a coherent framework establishing the bounds of corporate conduct and the obligations that multinationals have to various stakeholders. These milestones laid a foundation for national governments to begin enacting \u201chard law\u201d regulations.[2]<\/sup><\/a>\u00a0 We expect that ESG and B&HR obligations will take a firmer form in the years to come\u2014although these changes will often be a result of political pressure, national priorities, and global initiatives.<\/p>\n

This article traces the key recent developments in B&HR from international agreements to some of the leading national regulatory regimes.<\/p>\n

I. The International Framework<\/h1>\n

International law has traditionally focused on the role of states. While the role of non-state actors has played a limited role, certain efforts to identify international obligations for businesses exist.<\/p>\n

A. The UN Global Compact<\/a> (2000)<\/strong>[3]<\/sup><\/a><\/p>\n

Conceived by former UN Secretary Kofi Annan, the UN Global Compact is a voluntary initiative where companies commit to implement universal sustainability principles and take steps to support UN goals.\u00a0 The UN Global Compact is \u201copen<\/a> to any company that is serious about its commitment to work towards implementation of the UN Global Compact principles throughout its operations and sphere of influence, and to communicate on its progress.\u201d[4]<\/sup><\/a>\u00a0Principle I requires a company to comply with all applicable laws and internationally recognized human rights while Principle 2 requires that companies are not complicit in human rights abuses.[5]<\/sup><\/a> The remaining eight <\/a>principles provide specific provisions for labor, environment, and anti-corruption.[6]<\/sup><\/a>\u00a0 Even though the Compact is a voluntary initiative, by signing up, companies must produce an annual \u201cCommunication on Progress\u201d (COP) that details their work to embed the ten principles in their activities. So far, 21,493<\/a> companies from 162 countries have signed up for the Global Compact.[7]<\/sup><\/a><\/p>\n

B. The (Draft) Norms on the Responsibilities of Transnational Corporations<\/a> (2003)<\/strong>[8]<\/sup><\/a><\/p>\n

In 2003, a Working Group chaired by Professor David Weissbrodt submitted the \u201cNorms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights\u201d (the \u201cNorms\u201d) to the UN Sub-Commission on the Promotion and Protection of Human Rights.\u00a0 The Norms were the first attempt to create human rights norms specifically aimed at transnational corporations.<\/p>\n

There were specific Norms addressing non-discriminatory treatment, security of persons, rights of workers, anti-bribery provisions, consumer protection, and environmental protection. The document also identifies 14 obligations and 5 provisions aimed at implementing the Norms. The Norms were subject to \u201cperiodic monitoring and verification\u201d by the UN, including by existing mechanisms, and a mechanism to be created regarding the application of the Norms.\u00a0 Even though the Norms were regarded as a landmark step, they were not approved by the UN Commission on Human Rights because they faced opposition<\/a> from several states and the business community.[9]<\/sup><\/a><\/p>\n

C. The UN Guiding Principles on Business and Human Rights<\/a> (2011)<\/strong>[10]<\/sup><\/a><\/p>\n

Following the failure of the Norms, the former UN Secretary General Kofi Annan appointed Harvard Professor John G. Ruggie as a Special Representative on Business and Human Rights. This led to the creation of the UN Guiding Principles on Business and Human Rights (the \u201cGuiding Principles\u201d).\u00a0 The Guiding Principles are based on three pillars: (i) a state bears the duty to protect<\/em> against human rights abuses within its territory, (ii) a corporation must respect<\/em> human rights and address adverse human rights impacts with which they are involved, and (iii) a state has the primary responsibility to remedy<\/em> any human rights abuses within its territory.<\/p>\n

While the Guiding Principles do not have a formal accountability mechanism,[11]<\/sup><\/a> they envision that \u201ceffective grievance mechanisms\u201d are available based on multi-stakeholder and other collaborative initiatives. As a largely voluntary initiative, the Guiding Principles are often invoked by parties in their international pleadings to argue the failure of due diligence (see<\/em> Bear Creek<\/em> Amicus Reply<\/a>[12]<\/sup><\/a> or Guatemala Counter-Memorial<\/a>)[13]<\/sup><\/a> or the need for human rights assessment (Metlife<\/em> Amicus<\/a>).[14]<\/sup><\/a><\/p>\n

D. Draft UN Legally Binding Instrument to Regulate Activities of Transnational Corporations <\/a>(2021)<\/strong>[15]<\/sup><\/a><\/p>\n

Despite the failure of the Norms, since 2014, there have been efforts to create a Legally Binding Instrument to Regulate the Activities of Transnational Corporations and Other Business Enterprises (the \u201cInstrument\u201d). The Open-Ended Intergovernmental Working Group (OEIGWG) created by the UN Human Right Council drafted this Instrument. \u00a0The Draft makes clear that the purpose of this Instrument is to clarify the human rights obligations of business enterprises and facilitate the implementation of these obligations (art. 2.1). The Instrument places primacy of obligation on state parties who are required to \u201cregulate effectively the activities of all enterprises within their territory, jurisdiction or otherwise under their control\u201d (art. 6.1).<\/p>\n

Art. 16 provides that states shall take all \u201cnecessary legislative, administrative or other action including the establishment of adequate monitoring mechanisms\u201d to ensure implementation.\u00a0 Indeed, the Instrument envisions the creation of an International Fund for Victims to provide legal and financial aid (art. 15.7).<\/p>\n

II. Efforts within National Law<\/h1>\n

We see a nascent effort to move obligations from voluntary regimes to obligations in domestic law.\u00a0 At this stage, the obligations are limited; however, with greater pressures from the public and with concerns about climate change, we might see further action. Listed below are examples of human rights obligations on businesses.<\/p>\n

A. US: Uyghur Forced Labor Prevention Act (UFLPA)<\/a><\/strong><\/p>\n

Since the 1930 Tariff Act, the US has had legislation prohibiting products created by forced labor from entry into the country. However, carveouts allowed nearly all products to escape inquiry by the Government.<\/p>\n

Over the past few years, the US Government has sought to enforce its regulations prohibiting the import of goods produced using forced labor through its increasing use of Withhold Release Orders by the US Customs and Border Protection Agency (\u201cUSCBP\u201d) and its implementation of the Uyghur Forced Labor Prevention Act (\u201cUFLPA\u201d).[16]<\/sup><\/a><\/p>\n

Many Guidance documents on complying with these regimes reference the Guiding Principles and other international best practices such as human rights due diligence as methods of ensuring that a company\u2019s supply chains practices comport with their responsibilities under the law.<\/p>\n

The UFLPA came into effect on 21 June 2022.[17]<\/sup><\/a> It expands the scope of the US Government\u2019s approach to prohibiting goods which it suspects were produced using forced labor from entering the US market.[18]<\/sup><\/a> The enforcement plan for the UFLPA creates a rebuttable presumption<\/a><\/strong> that all goods (or component parts of such goods) imported into the US that have a nexus to the Xinjiang region of China, or a list of restricted entities that use Uyghur labor, were produced under conditions of forced labor.[19]<\/sup><\/a><\/p>\n

The enforcement guidance states<\/a> that US Customs and Border Protection \u201cwill implement an enforcement plan that identifies and interdicts goods from high-priority sectors that are found to have a nexus to production in Xinjiang, subsidiaries and affiliates of Xinjiang Production and Construction Corps, and any other producing entity found to utilize forced labor via a government-labor scheme.\u201d[20]<\/sup><\/a><\/p>\n

The UFLPA applies to all imports into the US and, importantly, does not contain a de minimis<\/em> exception. Thus, even if one button on a jacket has a nexus to Xinjiang, this shipment would be prohibited from entry. It also applies to manufacturers that use Uyghur labor in other areas of China if they are on the list of restricted entities. Its geographical scope is broader than the Xinjiang region.<\/p>\n

If USCBP determines that products are within the scope of the Act, the evidentiary burden to rebut the presumption of forced labor is extremely high. There have not yet been any reports of importers successfully rebutting the presumption of forced labor. Rather, importers have focused<\/a> on demonstrating to the USCBP that the subject goods do not fall within the scope of the Act, i.e., they have no nexus to Xinjiang and\/or Uyghur labor.<\/p>\n

B. Due Diligence Regimes in EU Countries<\/u><\/strong><\/p>\n

The European Commission has recently proposed<\/a> a prohibition on the import and\/or export of products that were produced using forced labor.[21]<\/sup><\/a> Although some EU countries require multinationals of sufficient size to establish a human rights due diligence framework to identify and prevent human rights abuses, others, including Germany<\/a>[22]<\/sup><\/a>and France<\/a>,[23]<\/sup><\/a> have implemented human rights due diligence regimes for international supply chains.<\/p>\n

Companies which are subject to the regulations by virtue of their size (e.g., employee numbers or revenue) must conduct their operations in accordance with governments\u2019 expanding ESG priorities. These companies, for instance, should develop contractual frameworks with their counterparties that solidify these requirements as obligations, particularly when their counterparties are not subject to similar ESG-type regulation. For example, Section 6 of the German Due Diligence law discusses implementing: (i) contractual assurances that suppliers will comply with human rights obligations; and (ii) contractual control mechanisms when abuses are discovered.<\/p>\n

In February 2022, the European Commission made public its Draft Directive on the proposed standard for due diligence on human rights and environmental issues (the \u201cEU Draft Directive\u201d).[24]<\/sup><\/a> The EU Draft Directives applies to EU companies which have either (i) more than 500 employees and a net worldwide turnover of EUR 150 million, or (ii) more than 250 employees and a net world turnover of more than EUR 40 million provided 50% of the net turnover was in a \u201chigh risk\u201d sector (such as textiles, clothing and footwear, agriculture, forestry, fisheries, and extraction of mineral resources among others).\u00a0 It also applies to non-EU companies which have either (i) net turnover of more than EUR 150 million in the EU, or (ii) net turnover of more than EUR 40 million but not more than EUR 150 million, provided that at least 50% of its net worldwide turnover was in a \u201chigh-risk\u201d sector (art. 2).\u00a0 The EU Draft Directives lay down rules (i) on obligations for companies regarding actual and potential adverse impacts on human rights and the environment with respect to their operation, their subsidiaries, and the value chain operations, and (ii) on liability for violations of the obligations.\u00a0 The EU Draft Directive will be enforced by Member States that create supervisory authorities. These supervisory authorities can take remedial action, including the imposition of sanctions.\u00a0 When pecuniary sanctions are imposed, they are based on a company\u2019s turnover (art. 20).<\/p>\n

Conclusion<\/h1>\n

ESG obligations at the international and regional level remain at a nascent stage. With increased public focus and efforts by both the UN and the EU, however, we will likely see the creation of binding obligations that companies managing international supply chains will have to consider.<\/p>\n

[*]<\/a> Patrick Miller<\/a> is the Founding Attorney of Impact Advocates APC<\/a>, a law firm focused on international commercial dispute resolution, responsible supply chains and ESG-related matters. He is a strong advocate for ESG & social businesses and passionate about assisting these companies when they encounter commercial disputes.\u00a0Kabir Duggal<\/a> is an SJD Candidate at Harvard Law School and a Lecturer-in-Law at Columbia Law School.\u00a0 The views expressed are personal and the authors reserve the right to change the positions stated herein.<\/p>\n

[1]<\/a> See<\/em> Colin Mayer, Leo E. Strine Jr. & Jaap Winter, 50 Years Later, Milton Friedman\u2019s Shareholder Doctrine Is Dead<\/em>, Fortune (Sept. 13, 2020), https:\/\/fortune.com\/2020\/09\/13\/milton-friedman-anniversary-business-purpose\/.<\/p>\n

[2]<\/a> Scholars have referred to a \u201cGalaxy of Norms\u201d which includes both international conventions and national \u2018hard law\u2019 obligations. See, e.g.<\/em>, Elise Groulx Diggs, Milton C. Regan & Beatrice Parance, Business and Human Rights as a Galaxy of Norms<\/em>, 50 Geo. J. Int\u2019l L. 309 (2019).<\/p>\n

[3]<\/a> The Ten Principles of the UN Global Compact<\/em>, United Nations, https:\/\/unglobalcompact.org\/what-is-gc\/mission\/principles<\/a>.<\/p>\n

[4]<\/a> About the UN Global Compact: Frequently Asked Questions<\/em>, United Nations Global Compact, https:\/\/unglobalcompact.org\/about\/faq<\/a>.<\/p>\n

[5]<\/a> The Ten Principles of the UN Global Compact<\/em>, supra<\/em> note 3, at Principles 1 and 2.<\/p>\n

[6]<\/a> Id.<\/em> at Principles 3 to 10, available at<\/em>: https:\/\/unglobalcompact.org\/what-is-gc\/mission\/principles<\/a>.<\/p>\n

[7]<\/a> United Nations Global Compact Website Cover page<\/em>, U.N. Global Compact, https:\/\/unglobalcompact.org\/<\/a>.<\/p>\n

[8]<\/a> U.N. Econ. and Soc. Council, Sub-Comm\u2019n on the Promotion and Prot. of Hum. Rts.,\u00a0Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights, U.N. Doc. E\/CN.4\/Sub.2\/2003\/12\/Rev.2 (Aug. 26, 2003), https:\/\/digitallibrary.un.org\/record\/501576?ln=en#record-files-collapse-header<\/a>.<\/p>\n

[9]<\/a> Pini Pavel Miretski \u00b6 Sascha-Dominik Bachmann, The UN \u2018Norms on the Responsibility of Transnational Corporations and Other Business Enterprises with Regard to Human Rights\u2019: A Requiem<\/em>, 17 Deakin L.R. 5, 8-9 (2012) (\u201cSuch explicit support for the Norms<\/em> was accompanied by often fierce opposition from various states and the majority of the business community.\u00a0 Such opposition arose from the moment the Norms <\/em>were formally introduced as a discussion paper after their approval by the Sub-Commission.\u00a0 Most states expressed strong reservations, emphasizing their determination not to depart from the traditional framework of international law, which stresses the central and pivotal role of the state as a legal subject of public international law. \u00a0The Norms<\/em> were eventually abandoned in 2005 and the task of regulating transnational corporate accountability was transferred to other UN organs.\u201d) (internal citation omitted).<\/p>\n

[10]<\/a> Guiding Principles on Business and Human Rights<\/em>, U.N. Office of the High Comm\u2019r For Hum. Rts. (2011),https:\/\/www.ohchr.org\/sites\/default\/files\/documents\/publications\/guidingprinciplesbusinesshr_en.pdf<\/a>.<\/p>\n

[11]<\/a> In contrast, the 2011 OECD Guidelines for Multinational Enterprises provides for \u201cNational Contact Points\u201d \u201cto further the effectiveness of the Guidelines<\/em> by undertaking promotional activities, handling enquiries and contributing to the resolution of issues that arise relating to the implementation of the Guidelines . . .\u201d as well as the \u201cInvestment Committee\u201d that shall \u201cperiodically or at the request of an adhering country hold exchanges of views on matters covered by the Guidelines and the experience gained in their application.\u201d\u00a0 See<\/em> Procedural Guidance<\/em>, OECD Guidelines for Multinational Enter. 68 (2011), https:\/\/www.oecd.org\/daf\/inv\/mne\/48004323.pdf<\/a>.<\/p>\n

[12]<\/a> Bear Creek Mining Corp. v. The Republic of Peru<\/em>, ICSID Case No. Arb\/14\/21, Bear Creek\u2019s Reply to the Amicus Curiae Submissions of Dhuma and Dr. Lopez \u00b6\u00a018 (Aug. 18, 2016).<\/p>\n

[13]<\/a> Daniel W. Kappes and Kappes, Cassiday and Associates v. Republic of Guatemala<\/em>, ICSID Case No. ARB\/18\/43, Guatemala\u2019s Counter-Memorial \u00b6\u00b6\u00a01, 152 (Dec. 7, 2020).<\/p>\n

[14]<\/a> MetLife, Inc., MetLife Servicios S.A. and MetLife Seguros de Retiro S.A. v. Argentine Republic<\/em>, ICSID Case No. ARB\/17\/17, Amicus Curaie Submission (Mar. 30, 2021), \u00b6\u00a090.<\/p>\n

[15]<\/a> Legally Binding Instrument to Regulate, in International Human Rights Law, The Activities of Transnational Corporations and Other Business Enterprises<\/em>, U.N. Open-Ended Intergovernmental Working Grp. on Transnat\u2019l Corps. and Other Bus. Enter. With Respect to Hum. Rts. (2021), https:\/\/www.ohchr.org\/sites\/default\/files\/Documents\/HRBodies\/HRCouncil\/WGTransCorp\/Session6\/LBI3rdDRAFT.pdf<\/a>.<\/p>\n

[16]<\/a> Forced Labor<\/em>, U.S. Customs and Border Prot., https:\/\/www.cbp.gov\/trade\/forced-labor<\/a>.<\/p>\n

[17]<\/a> Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People\u2019s Republic of China: Report to Congress<\/em>, U.S. Dept. Homeland Sec. (June 17, 2022), at 8, https:\/\/www.dhs.gov\/sites\/default\/files\/2022-06\/22_0617_fletf_uflpa-strategy.pdf<\/a>.<\/p>\n

[18]<\/a> Id.<\/em><\/p>\n

[19]<\/a> Id.<\/em> at v (\u201cThe UFLPA establishes a rebuttable presumption that goods mined, produced, or manufactured wholly or in part in Xinjiang or by an entity on the UFLPA Entity List are prohibited from U.S. importation under 19 U.S.C. \u00a7 1307.\u201d).<\/p>\n

[20]<\/a> Id<\/em>. at 19.<\/p>\n

[21]<\/a> Philip Blenkinsop, EU Proposes Banning Products Made With Forced Labour<\/em>, Reuters (Sept. 14, 2022), https:\/\/www.reuters.com\/markets\/europe\/eu-proposes-banning-products-made-with-forced-labour-2022-09-14\/<\/a>.<\/p>\n

[22]<\/a> See<\/em> Lieferkettensorgfaltspflichtengesetz [LkSG] [Act on Corporate Due Diligence Obligations in Supply Chains], July 16 2021, https:\/\/www.bmas.de\/SharedDocs\/Downloads\/DE\/Internationales\/act-corporate-due-diligence-obligations-supply-chains.pdf;jsessionid=71731FA3BE835852C39F24D5BEFF8C60.delivery1-replication?__blob=publicationFile&v=2<\/a>.<\/p>\n

[23]<\/a> See French Duty of Vigilance Law – English Translation<\/em>, Bus. and Hum. Rts. Res. Ctr. (Dec. 14, 2016), https:\/\/www.business-humanrights.org\/en\/latest-news\/french-duty-of-vigilance-law-english-translation\/<\/a>.<\/p>\n

[24]<\/a> Just and Sustainable Economy: Commission Lays Down Rules for Companies to Respect Human Rights and Environment in Global Value Chains<\/em>, Eur. Comm\u2019n (Feb. 23, 2022), https:\/\/ec.europa.eu\/commission\/presscorner\/detail\/en\/ip_22_1145<\/a>.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Patrick Miller and Kabir Duggal 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