UN Forum on Business and Human Rights 2020 – part 2 – Establishing a level playing field through legislation

Last week, stakeholders from government, business and civil society discussed the most pressing challenges in business and human rights, particularly establishing a fair approach to mandatory supply chain due diligence. 

This year’s forum was held virtually for the first time, bringing together more than 4,000 registered participants from 140 countries; 40 per cent of participants came from the private sector.

We are excited to share insights from some of the three-day event’s sessions. (Our summary is divided into two: the first part on COVID-19, EU supply chain Legislation and climate change is here.)

Desire for mandatory supply chain due diligence, but disagreement remains

In a separate session on mandatory human rights due diligence, stakeholders from government, business, trade unions and civil society discussed mandatory human rights due diligence legislation. An increasing number of states, especially in Europe, are adopting or developing mandatory human rights due diligence measures, including France, the Netherlands, Germany, Finland, the UK, Norway, Sweden and Switzerland.

Speakers such as Francis West, Business Engagement Director at Shift, said the desire for a level playing field means general agreement on mandatory human rights due diligence, although disagreement remains on how to get there. He argued that mandatory human rights due diligence should go beyond ‘tick-box’ exercises and needs to be grounded in how a company runs its business. He also underlined the importance of avoiding regulation that passes on the burden of human rights compliance to suppliers outside of Europe. (See our recent blog on the Corporate Human Rights Benchmark 2020.)

Consensus in the private sector for human rights due diligence law 

Théo Jaekel, Corporate Responsibility Expert at Ericsson, said there is consensus in the private sector about harmonising rules, adding that creating legal certainty benefits business: the current process at the EU level gives businesses confidence in a unified approach. Mandatory human rights legislation should be applicable to all companies, he said, and experience from existing legislation (eg on ABC) can be applied in a human rights context (eg what can be reasonably be expected from companies). He also suggested that effective legislation requires liability provisions and that the UN Guiding Principles (UNGPs) should be used to build on what is expected from companies. In his view, liability needs to be both a deterrent for companies and a remedy for affected stakeholders.

Prioritisation and discretion in mandatory human rights due diligence law 

Lara Wolters, Member of the European Parliament, said that the draft proposal on mandatory human rights due diligence legislation recently proposed by the European Parliament includes only provisions already in the UNGPs or the OECD Guidelines. She highlighted prioritisation (Principle 17 of the UNGPs) as an important aspect, explaining that it is very often impossible to look at every aspect of the value chain simultaneously. She stressed the importance of giving companies some discretion in how they conduct due diligence because they know their business models and value chains best. She also expressed hope that other continents would follow the EU’s plan to adopt mandatory human rights due diligence.

A legally binding instrument (LBI)

Since 2014, an open-ended intergovernmental working group (IGWG), which is chaired by Ecuador, has been mandated by the UN Human Rights Council to prepare a treaty on a legally binding instrument (LBI) to ensure that multinational corporations and other businesses are conducting their business activities in compliance with human rights, and that access to remedy is provided for on a global level. After six sessions, the IGWG has presented a second revised draft of the LBI in October 2020, which was the main subject of a panel discussion.

Anita Ramasastry stressed that, under the UNGPs, governments are asked to consider a smart mix of actions to ensure compliant business conduct, including national and international, mandatory and voluntary measures. In light of this, the treaty process for the elaboration of an LBI is clearly anticipated under the UNGPs. Surya Deva emphasised that the revised 2020 draft of the LBI is now further aligned with the UNGPs. In particular, it more accurately reflects the requirements of the second pillar of the UNGPs, serving as a blueprint for businesses to prevent and address negative human rights impacts. Evolving human rights standards based on the UNGPs means that rights must entail obligations and that prevention and access to remedy are both equally vital.

Humberto Cantu Riviera, Executive Director of the Institute of Business and Human Rights at the University of Monterrey, said that any regulations within the framework of human rights, while giving legal sense to the three pillars, need to be coherent to each other. Local regulations typically not sufficiently address the issue of access to remedy in a transnational context. He added that, for most of the intensively discussed topics on the LBI (eg shift in the burden of proof), precedents already exist in various jurisdictions so there is no need to “reinvent the wheel” only for the LBI.

Kinda Mohamedieh, Senior Researcher and Legal Adviser at the Third World Network, shared her views on the crucial cornerstones of the LBI: prevention, jurisdiction and liability. She said that due diligence obligations and accountability need to go beyond intra-group relationships and cover external business relationships. Contrary to what is often claimed, the LBI does not seek to establish an extra-jurisdictional remedy mechanism; rather it suggests that affected parties may also seek remedy against the asset-heavy parent companies in their jurisdictions, if mandatory due diligence obligations have not been adhered to by such a parent. Accordingly, the LBI is not going to pierce the corporate veil, but rather to clearly establish the responsibilities of the parent, against which it will then, however, need to be held directly accountable.

Key take-aways

The panel discussions have illustrated that mandatory human rights due diligence is not only demanded by civil society, but also increasingly supported by corporations which count on supranational regulations to level the playing field in an increasingly fragmented legal landscape. However, while mandatory human rights due diligence is clearly on the agenda of European lawmakers, other initiatives such as the LBI still need to overcome some obstacles. In any case, companies need to be aware that the recent regulatory efforts go into the direction of mandatory human rights due diligence, not to pierce the corporate veil, but to establish own accountability by imposing obligations directly applicable to the controlling parents.