New IBA guidance on how business lawyers should address human rights risks

On 1 November 2016, the International Bar Association (IBA) launched the Reference Annex to the IBA Practical Guide on Business and Human Rights for Business Lawyers (the Annex). This Annex is intended to supplement the IBA Practical Guide, published in May this year, providing more in-depth guidance on the potential implications for the legal profession of the UN Guiding Principles on Business and Human Rights (UNGPs). 

The Annex highlights the key role that lawyers – and in particular in-house lawyers – can play in advising companies on human rights issues, given their unique ability to influence business strategy with regard to the management of risk. Increasingly, human rights compliance requires companies to navigate complex legal regimes comprising both “hard” and “soft” law, and matters which were once the preserve of the corporate social responsibility teams are increasingly finding their way to the general counsel’s office. In this regard, the Annex notes that “the general counsel should be prepared to act not only as a technical legal expert, but also as a wise counsellor or trusted advisor and sometimes as the company’s leader on human rights”. 

The key messages of the Annex include:

Transparency:

for many in-house lawyers there is a clear – and often justified – concern that disclosure of certain human rights-related information could be used against a company in litigation, or public campaigns. The Annex sets out the countervailing benefits of transparency to assist in weighing up these risks, noting in particular the need to: (i) get ahead of ever more exacting human rights reporting requirements; (ii) respond to growing pressures on companies to manage human rights risk from investors, customers and business partners; and (iii) avoid creating an impression that the company is not being transparent, which can fuel suspicion, distrust and rumour.

Contracts and agreements: 

the Annex notes that lawyers can play a significant role in mitigating human rights risks in the course of drafting and negotiating contracts. Indeed, contract terms can very effectively incentivise parties to honour human rights obligations, maximise a company’s human rights leverage and facilitate risk monitoring and management. With this in mind, the Annex provides commentary on drafting a range of agreements, including host state investment agreements, JV documentation, M&A agreements and supply contracts.

Shaping industry- or issue-specific standards:Principles for Responsible Contracts, which provides guidance on embedding human rights considerations in host state/investor contract negotiations. It notes further that business lawyers were also instrumental in drafting the Global Network Initiative Principles, which address privacy and freedom of expression issues in the IT sector, and the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, for companies involved in high-risk mining and minerals trading. The Annex highlights that a company’s engagement in such initiatives – and particularly insights provided by its legal team – can be an effective means of embracing the collaborative response to human rights issues encouraged by the UNGPs, and enable the development of targeted, effective risk management tools suitable for companies in particular industries.

the Annex calls on business lawyers to assist in shaping new international standards on the implementation of the UNGPs. It cites the integral role played by lawyers representing extractives companies and governments in Africa in the drafting of the