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Focus on Regulation

Hardening law, blockchain and managing multi-faceted international legal risk – key themes at this year’s UN Forum on Business and Human Rights

This week, the UN Forum on Business and Human Rights in Geneva brought together representatives of business, government and civil society for three days of open, frank and constructive dialogue.  Three messages came across loud and clear – businesses in all jurisdictions should take note:

(1) The direction of travel is towards hard law and responsibility throughout the value chain – businesses which voluntarily comply with the UNGPs and take advantage of emerging technology to do so will enjoy a competitive advantage

In a session on the French Duty of Vigilance Law, senior representatives of French multinationals spoke about the steps which they have taken to understand and manage human rights risk in their operations and supply chains.   Many of these steps were taken voluntarily, before the new law was drafted, so as to fulfil their responsibilities under the UN Guiding Principles.  When the law comes into force, they will already be in a position to demonstrate their compliance.  This will create a competitive advantage over businesses which only took these steps when it became a legal obligation.

Businesses not subject to the French Law should take note.  Internationally, the direction of travel is towards hard law and legal responsibility throughout the value chain.  From Switzerland to the Philippines and Australia, there are moves to introduce binding law in this area.  Businesses which voluntarily fulfil their responsibilities under the UN Guiding Principles will be ahead of the curve if (or when) soft law “hardens”.

Given the shift towards responsibility throughout the value chain, it is more important than ever for a business to understand its supply chain and identify human rights risks and impacts within it.  Projects in Bangladesh and the Philippines have shown that blockchain can be a neutral carrier of supply chain data facilitating effective due diligence and acting as an early warning system for adverse human rights impacts.

(2) Not all mechanisms to access a remedy are complementary – law makers should seek to build on the consensus of the UNGPs and take care not inadvertently to undermine this

At various sessions, concern was raised about the use of sustainability reports and human rights impact assessments as a basis to found a duty of care in parent company liability cases (see our previous post on the potential “Catch 22” created by the Vedanta case in England).  This could discourage businesses from fulfilling their responsibilities under the UN Guiding Principles and being transparent about risks and impacts in their operations and supply chain.  In the US, courts have been mindful of the policy impact of such an approach.  Judges and policy makers in the UK should take note.  If there is to be a hardening of the law, the better approach is that taken by the French legislature, building on (rather than undermining) the consensus created by the UN Guiding Principles to create binding law and access to remedy.

There was also interesting debate around a due diligence defence, perhaps along the lines of the “adequate procedures” defence under the UK Bribery Act.  Introducing this in any binding treaty or domestic legislation could help to strike the right balance between access to remedy and ensuring legal certainty for business.

(3) Human rights risk is legal risk.  It is also multidisciplinary and international.  Businesses and the lawyers who advise them need to be alive to this

The move towards hard law (incremental though it may be) leaves little doubt that a business’s human rights risk is legal risk.  Businesses which treat the responsibility to respect as an optional extra put themselves (and their executives) at risk of civil and criminal liability.  In order to protect the best interests of the business, lawyers (whether in house or in private practice) should be involved in the identification and management of human rights risk.

From civil liability in France for harm resulting from a failure to implement a vigilance plan, parent company liability in the UK or Canada, or criminal liability in any state willing to exercise universal jurisdiction over a human rights impact which amounts to a crime under international law, the nature of a business’s human rights related legal risk is multi-jurisdictional and multi-disciplinary.  Businesses and the lawyers who advise them need to be alive to this.