Any of our business? Human Rights and the UK private sector - Human Rights Joint Committee Contents


Why do human rights matter to UK business?

15. Human rights are traditionally - and accurately - viewed as the rights enjoyed by individuals which the state has a duty to respect and protect. In the UK context, this is reflected in the constitutional settlement in the Human Rights Act 1998 ("HRA 1998"). The duties imposed by that Act apply to public authorities and a private body will be required to act compatibly with Convention rights only when it performs "a public function".[21]

16. Although the duties of the HRA 1998 only apply to business in limited circumstances, the Act may have a much broader impact on businesses and their activities in the UK. For example, private entities have their own rights, as guaranteed by the ECHR and other international instruments.[22] Increasingly, human rights arguments arise in business disputes, and are relevant to businesses' relationships with Government and their disputes with other entities. For example, newspapers and publishers regularly invoke the right to freedom of expression, not only in litigation, but also in their approach to Government policy.[23]

17. The HRA 1998 does not provide for the direct or horizontal application of Convention rights between private individuals. However, the UK's domestic courts remain under a duty to interpret and apply the law in a manner which is compatible with Convention rights, including the law as it applies to disputes between private parties.[24] Section 3 of the Act places them under a specific duty to interpret all legislation, in so far as is possible, in a manner which complies with the Act. All public authorities, including local authorities and regulators such as the Office of Fair Trading or the Financial Services Authority are bound to act in a manner which is compatible with Convention rights. These broad indirect effects clearly have an impact on the legal and regulatory framework in which businesses operate.

18. There are also broader questions to consider about the international human rights obligations of the UK and their relationship with the activities of UK business. The Government told us that there were three broad points about the relationship between business and the UK's human rights obligations:

  • First, in order to meet its human rights obligations, the UK may have to restrain or regulate the activities of businesses, in order to ensure that their activities respect the rights of others.[25] The activities of business may help or hinder the state to meet its negative or positive obligations under human rights law and may contribute towards the progressive realisation of any number of economic and social rights, including the right to an adequate standard of living.
  • Secondly, the impact of business on the human rights obligations of the UK will be enhanced where the relevant business is helping to fulfil those obligations under contract to the state.
  • Otherwise, private sector entities cannot be considered directly subject to the state's obligations. The Government considers that while business may have a significant impact on the state's capacity to meet its international obligations, ultimately, the obligation of the state to secure the protection of fundamental rights to any individual within its jurisdiction remains the obligation of the UK Government.[26]

19. There are a number of other clear examples of legislative measures taken in the UK designed to protect fundamental rights, but which limit or regulate the activities of businesses or which rely on businesses to secure individual rights. For example, since the mid-1970s, businesses have been required to comply with the requirements of the Sex Discrimination Act and the Race Relations Act to secure the right to non-discrimination in employment. More recent examples of measures include the Corporate Manslaughter and Corporate Homicide Act 2007. Designed to create an offence of gross negligence corporate manslaughter, we welcomed the Bill as a measure capable of enhancing the ability of the UK to meet its obligation to protect the right to life, as guaranteed by Article 2 ECHR.[27] Many direct obligations on business may derive from the human rights obligations of the UK. Although the language may differ, the result is the same: human rights based regulation of business. Many of these requirements may be so ingrained in the obligations of business that firms fail to recognise their significance.[28]

20. The principal legal duty to protect human rights will always lie with the state. However, it would be short-sighted to consider that the implications for human rights and the private sector begin and end with this narrow legal construct. The human rights obligations of the UK may impact on the activities of business, just as the activities of UK business may impact on the ability of the UK to meet its obligations. We welcome the Government's recognition that the activities of business may affect the ability of the UK Government to meet its human rights obligations, both positively and negatively. We particularly commend the broad acceptance that certain obligations may require the regulation of business. As we aim to develop a human rights culture within the UK, the importance of understanding human rights principles for all UK residents - both individuals and corporate entities - should grow. There is a strong incentive on the Government to ensure that it has a clear understanding of how its policies on business relate to the human rights obligations of the UK.


21. In his 2009 report, the UN Special Representative recognised that the legal responsibilities of states in respect of companies activities outside of their geographical jurisdiction are more complicated:

    The extraterritorial dimension of the duty to protect remains unsettled in international law. Current guidance from international human rights bodies suggests that states are not required to regulate the extraterritorial activities of businesses incorporated in their jurisdiction, nor are they generally prohibited from doing so, provided there is a recognised jurisdictional basis and that an overall test of reasonableness is met. Within those parameters, some treaty bodies encourage home states to take steps to prevent abuse abroad by corporations within their jurisdiction.[29]

22. Most of our witnesses also recognised the legal distinction between the obligations on the UK Government in respect of business activities in the UK and on activities of UK companies that take place overseas.[30] Some witnesses stressed, however, that a number of existing international human rights bodies have called for states to take some extra-territorial action in respect of the activities of companies and other private entities. Witnesses pointed to statements made by the UN Human Rights Committee,[31] the International Court of Justice,[32] the UN Committee on Economic and Social Rights and the UN Committee on the Elimination of Racial Discrimination. For example: the UN Committee on the Elimination of Racial Discrimination has recently encouraged some states, in their Concluding Observations, to take appropriate legislative or administrative measures to prevent "adverse impacts" on the rights of indigenous peoples in other countries from the activities of corporations registered in that state and has recommended that states parties explore ways to hold transnational corporations "accountable" for their actions.[33]

23. Some witnesses observed that there appears to be a growing consensus within the EU that some form of state action is necessary to encourage companies based in the EU to respect human rights in non-EU states. For example:

    The European Parliament has recognised that European states have a responsibility to regulate for European-based corporations dealing in developing states. In 1999, the European Parliament passed a resolution calling for a legally-binding framework for regulating European trans-national corporations operating in developing countries. While the European Commission has not adopted this mandatory model, the European Commission has adopted a voluntary code and individual European nations have developed voluntary regulatory frameworks to encourage corporations to engage in ethical conduct.[34]

24. The assessment of the UN Special Representative, that there is no overarching requirement that states regulate the overseas activities of companies for compliance with all their human rights obligations, was generally accepted in the submissions to our inquiry.[35] Some witnesses argued, however, that there is nothing in international law to stop states exercising extraterritorial jurisdiction over the human rights impacts of companies registered, listed or with headquarters within their jurisdiction, provided that the duties imposed are reasonable.[36] The UN Special Representative agreed with this view.[37]

Policy reasons for action?

25. A number of witnesses argued that there are good policy reasons for the Government to regulate in some way the human rights impacts of UK companies operating abroad. Professor Ruggie concluded:

    There are […] strong policy reasons for home states to encourage their companies to respect rights abroad, especially if the state itself is involved in the business venture whether as owner, investor insurer, procurer, or simply promoter. Such encouragement gets home states out of the untenable position of being associated with possible overseas corporate abuse. And it can provide much-needed support to host states that lack the capacity to implement fully an effective regulatory environment of their own.[38]

26. Jennifer Zerk, on behalf of the Corporate Responsibility Coalition, a coalition of a number of NGOs working on corporate responsibility issues ("CORE"), told us that there were three main incentives for action:

  • It would be "morally right" to act because UK citizens benefit from the activities of UK companies abroad, as consumers and as shareholders;
  • In practice, it would be beneficial to the competitiveness of UK companies overseas. The UN Special Representative has clearly identified that the failure to provide clear guidance to Governments on activities overseas is not in the best interests of business;
  • This is an issue where the UK Government should show leadership. It is a key issue internationally and the UK provides the base for many major multinational companies.[39]

27. A number of witnesses also raised the risk posed to the UK by association with the activities of UK companies overseas. A number of the academics we spoke to in the US pointed out that, for example, BP would always be viewed internationally as a "British" company.

28. A number of witnesses, and some of the organisations we visited in the US, gave the example of US action on international corruption as a precedent for effective unilateral action by home states on private sector and human rights regulation. Global Witness said:

    The US discovered that there was a major problem with American corporations bribing. There was a particularly big scandal around Boeing in the 1970s. They unilaterally passed legislation [the Foreign Corrupt Practices Act] that outlawed US companies doing it and they used that as a platform then to launch an international programme which led to the OECD Anti-Bribery Convention, so I would say there is a role for unilateral action leading in due course to a multilateral convention on understanding these things.[40]

29. The Institute of Directors (IoD) said that there currently exists a "legal vacuum" in respect of some of the activities of UK business overseas, which need to be addressed.[41] The CBI argued that human rights abuses are created by host states which fail to implement a domestic legal framework designed to protect human rights. It described these situations as "by their very nature not easy to resolve".[42]

30. Both organisations disagreed with any approach which would involve the exercise of extra-territorial jurisdiction by the UK courts, particularly in cases without any substantive and demonstrable link to the UK.[43] The IoD argued in favour of an international solution, which provides for the international enforcement of human rights.[44] The CBI, however, is not generally in favour of an international solution, whether by means of a treaty or the formation of an international ombudsman.[45]

31. Witnesses highlighted a number of barriers to unilateral action by the UK in respect of the overseas activities of UK businesses. These included concern that taking extraterritorial steps could reduce the likelihood that countries with poor human rights records would change their practices for the better.[46] International human rights legislation could directly clash with domestic law in the host state and this could raise questions over the sovereignty of the host state and the obligation on any company to obey its laws.[47] Some witnesses expressed a view that the most constructive role for the UK Government would be capacity building in countries with poor human rights records.[48]

32. We recognise that there are complex legal and policy questions which arise around the cross-border operation of UK businesses, particularly where they operate in countries where states have weaker governance mechanisms than the UK for the purpose of protecting human rights in their jurisdiction. The purpose of this inquiry is consider these complex issues which the UN, major multinational companies and many other states have been grappling with for a decade. We intend to draw attention to the debate, consider the current UK stance on this issue, and put forward our recommendations below.

33. Although the UK's international legal obligations are far from clear, in our view there are good policy arguments in favour of action. The UK is a major consumer of internationally produced goods and provides a home to many major multinational companies. It is well placed to benefit from the experiences and activities of these many successful businesses. The UK is particularly vulnerable to impacts on its reputation when these companies are associated with allegations of human rights abuse overseas. If the UK fails to show leadership in this debate, it suggests to other states that it is not important to address the impacts of business on the fundamental rights of individuals. This may create the perception that the UK cares more about economics than human rights obligations. We recommend that the UK should play a leadership role in this global debate to ensure that multinational firms and other corporate entities respect human rights wherever they operate. We consider in more detail the actions the UK Government should consider in later Chapters.

Do human rights matter for small businesses?

34. At the start of 2007 there were 4.7 million businesses operating in the UK, over 950, 000 (25%) more than in 2000. Over 99% of UK businesses are small and medium sized enterprises (SMEs).[49] The World Bank ranks the UK second in Europe, and in the top ten world economies (out of 181) for measures on the ease of doing business.[50] Businesses operating in the UK range from sole traders to major multinational corporations. We have not used a specific definition of a UK business for the purposes of this inquiry. Some witnesses referred exclusively to companies registered in the UK or listed on a UK-based stock exchange in their evidence.

35. We asked the UN Special Representative whether the debate about human rights was only relevant to large multinational companies. He told us that size should not matter, but the implications of human rights for businesses may differ according to the nature and scale of their business:

    The basic principles of respecting human rights ought to apply to everybody but the modalities of implementation would surely differ. A company that has an annual turnover that is equivalent to the GDP of 80% of the countries of the world has different capacities and also a different impact than a company that employs 50 people and operates in Manchester or wherever. So the modalities are different depending on the size and scope and impact of the company, but the basic principles ought to be similar.[51]

36. A number of witnesses, including the CBI, appeared to agree with this analysis. Gary Campkin, for the CBI, said:

    The way in which smaller companies can have an impact is obviously different from the way in which some of the larger multinationals can have an impact. Therefore, I think there would be a degree of difference, depending on the impact, about how that responsibility is undertaken.[52]

37. Human rights principles are relevant to a businesses of any size or type, although their detailed application may differ from case to case. Policy, advice or guidance on human rights should take into account the diverse nature of the UK business community, including small business and consumers of small business services.

What about the recession?

38. Generally, witnesses rejected the proposition that the current economic climate should have any impact on the legal, moral or social responsibilities on business to respect human rights, whether within the UK or overseas.[53] Some argued that the current economic crisis served to show that light touch regulation of the private sector might not always be in the greater public good.[54] Professor Cees Van Dam said:

    Important causes of the financial crisis were a lack of social responsibility, an emphasis on short-term profits, and externalisation of costs and risk. These shortcomings are similar to the ones that negatively affect the sustainability of world trade in general and the lack of respect for human rights. In fact, we are talking about the same problem: large inefficiencies due to a lack of proper (global) regulation.[55]

39. Some witnesses told us that the current economic crisis had "sorted the wheat from the chaff", in that those businesses whose commitment to corporate responsibility had been superficial were now abandoning earlier initiatives and activities.[56] In his latest report, Professor Ruggie considered the current economic downturn and stressed that the greatest impacts would be felt by those who are already vulnerable. He considered that there were good reasons for Governments to avoid erecting protectionist barriers and lowering standards for business. He explained that despite the attractions which these measures might have: "short-run gains are illusory and they undermine longer-term recovery.[57] This reflects the view of Thomas Hammarberg, the Council of Europe Human Rights Commissioner, who has stressed that the rights of the vulnerable should not be ignored during the economic recovery.[58] The Government agreed that there were benefits of a human-rights based approach even in the recession, as there was "a strong business case for companies embedding human rights within their practices".

40. In the light of this stance, we were concerned to read recent press reports that individual businesses and the Secretary of State for Business, Innovation and Skills were arguing against aspects of the Equality Bill on the basis that in the current economic climate businesses should not be subject to additional regulation.[59]

41. The current economic climate should not adversely affect the commitment of the UK Government or UK businesses to human rights. The Government has a responsibility to help businesses understand what a human rights responsible approach means and what it can add to business planning and to the global economic recovery. We welcome the Government's statement that despite the economic climate, there is still a strong business case for embedding human rights in business. This sentiment should be consistently reflected across Government during the recession and thereafter.

21   Section 6(3)(b). Back

22   See for example, Marius Emberland, The Human Rights of Companies, Oxford University Press, 2006.See also Colas Est SA & Ors v France [2004] 39 EHRR 17. Back

23   Campbell v Mirror Group Newspapers [2004] UKHL 22 Back

24   Section 6. See for example, Campbell v Mirror Group Newspapers [2004] UKHL 22 at para 17, where Lord Nichol explained "The values embodied in Articles 8 and 10 are as much applicable in disputes between individuals or between an individual and a non-governmental body such as a newspaper as they are in disputes between individuals and a public authority".  Back

25   The Legal Adviser to the FCO, Daniel Bethlehem QC has recently written to the UN Special Representative to clarify the UK view that there is no general international obligation on States to protect against the acts of third parties which may impact on human rights.The UN Special Representative has replied, accepting that although no such general duty exists, there are many UN treaties which do impose an express or implied duty on the UK to ensure that individuals enjoy the rights guaranteed.This, in the view of the UN Special Representative, includes a duty to secure those rights from interference by third parties.While the substance of the right may determine that it has little relevance to third parties or businesses, the duty to secure the right to people under the jurisdiction of the State remains.See letter dated 9 July 2009 from Daniel Bethlehem QC to UN Special Representative; Letter in response dated 14 July 2009, UN Special Representative to Daniel Bethlehem QC.Correspondence available from Parliamentary Archive or online at  Back

26   Ev 85 Back

27   Twenty-seventh Report of 2005-06, Legislative Scrutiny: Corporate Manslaughter and Corporate Homicide Bill, HL Paper 246/ HC 1625, paras 1.35-1.36. Back

28   Ev 89 Back

29   Professor John Ruggie, UN special Representative of the Secretary General on the issue of human rights and transnational corporations and other business enterprises, Business and human rights: operationalising the 'protect, respect, remedy' framework, 22 April 2009, UN General Assembly, A/HRC/11/13, para 15.Herein "Ruggie Report 2009". Back

30   Ev 107  Back

31   Ev 107  Back

32   For example, interpreting the scope of Article 2 ICCPR, which provides that States are obliged to secure the rights under the ICCPR to everyone within its jurisdiction, the ICJ are recognised that jurisdiction is not strictly territorial: See Legal Consequences of the Constuction of a Wall in the Occupied Palestinian Terroitory (Advisory Opnion) [2004] ICJ 136, 178-9. See Ev 105 - 106.  Back

33   See Concluding Observations for Canada, CERD/C/CAN/CO/18, para 17; Concluding Observations for the United States, CERD/C/USA/CO/6. para 30. See also Ruggie Report 2009. Back

34   Ev 108 Back

35   See for example, Q 63 Back

36   Ev 108;See Q63 (Action Aid)  Back

37   QQ 39 - 42 Back

38   Ruggie Report 2009, para 16.See also Q11. Back

39   Q63.See also Ev 140 Back

40   Q334 Back

41   Ev 108 Back

42   Ev 309 Back

43   Ibid Back

44   Ev 108 Back

45   Ev 309 Back

46   Ev 230 Back

47   For example, Ev 109, Ev 149 Back

48   For example, QQ 355 - 359 (Lord Malloch-Brown). Back

49   Information taken from Department for Business, Innovation and Skills website: Back

50   Information taken from Department for Business, Innovation and Skills website: Back

51   Q24 Back

52   Q126. Mr Campkin went on to explain that the CBI considers that the Ruggie framework is relevant for all business, but a difference in the degree of expectation which might lie upon an SME business and a multinational corporation, see Q127.On our visit, we spoke with lawyers from Foley Hoag LLP, a US firm with broad experience of advising large multinationals about human rights impacts and responsibilities. They told us that increasing awareness and activity on the part of States and large companies had a trickle down effect for small businesses. Many large corporate consumers were beginning to require that their suppliers meet the requirements of their own human rights codes of practice. Similarly, many consumers were beginning to place greater emphasis on ethical business practices. Combined, these changes were increasing the number of smaller businesses who were aware and engaged with human rights issues. Back

53   See for example, Ev 114, Ev 217 Back

54   Ev 114 Back

55   Ev 289 Back

56   Q4 (Professor John Ruggie) Back

57   Ruggie Report 2009, para 9. Back

58 (on equality); (on children's rights). Back

59   The Independent, Harriet Harman: 'We must press ahead with equality plans', 28 September 2009.  Back

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