2 ANY OF OUR BUSINESS?
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.
UK GOVERNMENT AND UK BUSINESS OVERSEAS
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 http://www.business-humanrights.org/Search/SearchResults?SearchableText=ruggie+corporate+law+
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: http://www.berr.gov.uk/whatwedo/enterprise/au/statistics/page38573.html Back
50
Information taken from Department for Business, Innovation and
Skills website: http://www.berr.gov.uk/aboutus/corporate/performance/fastfacts/index.html 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
http://www.coe.int/t/commissioner/Viewpoints/090511_en.asp
(on equality); https://wcd.coe.int/ViewDoc.jsp?id=1436385&Site=CommDH&BackColorInternet=FEC65B&BackColorIntranet=FEC65B&BackColorLogged=FFC679
(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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