Memorandum submitted by Professor Cees
van Dam
ABOUT THE
AUTHOR
Professional background
Professor Cees van Dam
Independent Legal Consultant in London
Visiting Professor, King's College London
Honorary Professor of European Private Law,
Utrecht University
Relevant professional activities
— involved in litigation in the Netherlands
regarding liability of a Dutch based oil company for environmental
damage in an African country;
— participated in expert meeting in Beijing
prior to the EU-China summit (November 2008).
GENERAL REMARKS
The Committee's call for Evidence is a very
timely one and rightly adopts Professor John Ruggie's framework
as a basis for the business and human rights debate. This framework
is not a basis for litigation in the courts of justice but it
can be the basis for accountability of businesses in the courts
of public opinion. This is particularly useful as the latter courts
can have more impact in the short term whereas legal litigation
is time consuming and very expensive. The experiences with the
Alien Tort Claims Act (ATCA) in the United States confirm this.
This is not to say that the ATCA is not important, on the contrary.
But it would take too much time if victims of human rights violations,
businesses, governments and NGO's have to learn through litigation
what is right and what is wrong in this respect.
The Ruggie framework can speed up this learning
process and provide rules for proper business practices within
years rather than decades. This would create more certainty and
this is important as businesses are currently often uncertain
about their obligations as regards respecting human rights.
Even though the Ruggie framework is not a legal
one, many of his questions are similar to the ones a court of
justice would ask. Carrying out "due diligence" is akin
to acting as a reasonable man (company) in order to avoid damage
to people who can be foreseeably affected by the company's activities.
This means that developing Ruggie's framework may lead to standards
of conduct that can also be useful to establish what is legally
required.
On an optimistic note one could even say that
if Ruggie's framework and norms have led to voluntary compliance
by an important part of businesses, this may lead to calls from
these businesses for minimum legal norms in order to create and
protect a level playing field.
1. How do the activities of UK businesses
affect human rights both positively and negatively?
Negative impacts can be established through
Professor Ruggie's framework as well as by applying tort law instruments.
Professor Ruggie rightly argues that businesses
can impact on virtually all human rights. From a constitutional
and international law perspective the interesting discussion is
about the question whether businesses can violate human rights.
However, also tort law calls businesses to account as it aims
to protect many rights (life, health, bodily integrity, property)
even though they are not indicated as being "human rights".
Its history goes back to much earlier times than when human rights
saw the light of day. Tort law is also a broader and more directly
usable framework for the accountability of businesses than the
constitutional and international law framework as it can deal
with virtually all (negative) impact business can have on human
rights.
The Ruggie framework and tort law also deal
with the indirect involvement of business in human rights violations.
This is important because in many cases companies do not infringe
peoples' rights directly but rather indirectly by supporting or
cooperating with those who do (governments, suppliers, etc.).
Positive contributions of companies can follow
from the factual influence they have in the country where they
operate and which they can use to encourage respect for human
rights. This applies not only to their company policies but also
to contracts they conclude with their business relations such
as suppliers. Embassies can encourage businesses to respect human
rights and to advise them accordingly.
2. How do these activities engage the human
rights obligations of the UK?
The European Convention on Human Rights obliges
the United Kingdom to protect human rights, not only against infringement
by public bodies and businesses performing public functions but
also against infringement by individuals and business performing
private functions. For example, if a business uses slave labour
or child labour in its factory, the UK government has an obligation
to interfere and to protect the people whose human rights are
affected. However, the UK is not obliged to act when the human
rights violations take place outside the UK territory.
3. Are there any gaps in the current legal
and regulatory framework for UK businesses which need to be addressed,
and if so, how?
An obvious gap is caused by the fact that governments
are not entitled to enforce human rights abroad. For example,
when the subsidiary of a business uses child labour in its factory
in Bangladesh, it is for those authorities to interfere. Although
this is as such a sound principle of international law, the consequence
is that in many poorer countries human rights are not or poorly
enforced against transnational companies (sometimes the country
is poorer than the company it has to supervise).
One of the options to address this problem without
interfering with principles of international law is to encourage
cooperation between home and host governments to help the host
country to improve its human rights enforcement structures. Cooperation
between businesses, NGO's and UK-embassies could be useful too.
Another way to solve the problem is to hold
the parent company to account for the human rights record of its
subsidiary abroad. An obvious problem in this respect is the way
companies use complex group structures to avoid liability. To
a certain extent group structures are a useful tool but the question
is whether this should also be allowed in situations where a subsidiary
(domestic or abroad) is involved in human rights violations. Generally,
there is an imbalance in tort law between the amount to which
a parent can benefit from its subsidiaries and the amount for
which it has to take responsibility for their losses and liabilities.
This is a more or less global legal problem
that can only be solved at an international level. In the short
term it is up to the courts to impose duties of care on parent
companies to "look after" their subsidiaries (Lubbe
v Cape plc (HL) [2001] 1 WLR 1545).
6. How should UK businesses take into account
the human rights impact of their activities (and are there any
examples of good or bad practice which the Committee should consider)?
How can a culture of respect for human rights in business be encouraged?
UK businesses should take into account the human
rights impact of their activities by following the guidance provided
by governments, NGO's and international organisations like the
United Nations and the OECD. Transnational companies ought to
carry out impact assessments about possible human rights impacts
by their subsidiaries or business partners abroad. Subsequently,
they need to develop strategies to avoid human rights impact and
develop reporting and control mechanisms to ensure these strategies
are implemented and followed at all times.
Good examples are the Business Leaders Initiative
on Human Rights and the UN Global Compact. The latter provides
for a continuing learning process for companies and possibilities
to cooperate.
One of the ways for a government to encourage
such a culture could be to oblige businesses that ask the government
for benefits (credit guarantees, subsidies) to prove that they
respect human rights. This means that they have a company policy
that is implemented and effectively enforced.
For example, the Dutch government has adopted
a policy that if a company wants to be represented on a ministerial
trade mission abroad it has to show that it does not use child
labour in its supply chain.
Another option for a public body is to adopt
sustainability as one of the leading criteria when purchasing
goods and services. The Netherlands aims to implement such a policy
by 2010.
Finally, one may think of a European import
ban of products made with the help of the most serious forms of
child labour. This option is currently investigated by the European
Commission. There is an interesting parallel with the RAPEX system
and the General Product Safety Directive which helps to keep unsafe
products off the market.
Should UK businesses' responsibility to respect
human rights vary according to:
— Whether or not they are performing
public functions or providing services which have been contracted
out by public authorities. Is it clear when the Human Rights Act
1998 does and does not apply directly to businesses?
See my answer to question 1.
— Whether they are operating inside
or outside the UK?
In principle, it should not make a difference.
Human rights are for everyone, not only for the rich and the white.
The problem is that trade has been globalised but justice not
(yet). International law protects the freedom of trade but does
not regulate the way companies use this freedom in international
trade. As a consequence, many western companies shift their costs
to the environment, to employees and to children in countries
in the developing world.
The current situation represents what I call
human rights protectionism. We protect human rights of
our own people but we ignore human rights of people in other parts
of the world. Rather we benefit from infringements of their human
rights for our western economic good. In a global economy, human
rights protectionism is unsustainable.
Obviously, these are issues the UK cannot deal
with on its own. International cooperation is pivotal as are legal
measures to be taken at international level by the EU and the
WTO.
— The size, type or nature of their
businesses?
In principle, my answer would be no. However,
it is important to make sure that SME's policies and practices
in this respect are facilitated as much as possible by the government
and possibly other businesses. For example, one of the major problems
in a proper human rights policy is to know what happens at the
supplier's factory in a country far away from the UK. Structural
cooperation between businesses, UK embassies and NGO's can be
helpful in this respect.
How, if at all, should the current economic climate
affect the relationship between business and human rights?
A financial crisis was needed to realise the
importance of global regulation and of tougher domestic regulation
of the financial sector. 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. Albeit with one important
difference: western countries suffer from the financial crisis
(and are therefore prone to change) whereas they generally benefit
from companies abusing human rights (and are therefore less prone
to change).
The topic of business and human rights is not
about human rights and social norms only. It is, in fact, part
of the sound economic principle that business should pay its way.
If the price of a product does not reflect the real costs (including
costs that are too low because they benefit from human rights
violations), this will lead to inefficiencies that are, in the
longer run, unsustainable.
I would therefore prefer to reframe the discussion
on business and human rights to one about correcting (global)
market failures. First, correcting vertical market failures between
companies and the victims of human rights abuse caused by the
companies' dominant positions. Second, correcting horizontal market
failures between companies in order to create a level playing
field and encourage fair competition.
8. If changes are necessary, should these
include:
— Judicial remedies (if so, are legislative
changes necessary to create a cause of action, or to clarify that
a cause of action exists; or to enable claims to proceed efficiently
and in a manner that is fair to both claimants and respondents)?
Obviously, a proper remedies system is needed
to hold businesses to account and to provide victims of human
rights violations access to justice. Even though the Ruggie framework
is very useful indeed, there will always be a need for litigation,
particularly in bigger cases where serious human rights violations
are at stake. However, the current system generally deters victims
to go to court and have their case heard because of the costs
involved and the risks of having to pay costs if they lose the
case. Victims and NGO's supporting them do not have the means
to take this risk, although sometimes law firms may be prepared
to take on a case on a no win no fee basis.
— Non-judicial remedies (for example,
through the operation of ombudsmen, complaints mechanisms, mediation
or other non-judicial means). If non-judicial remedies are appropriate,
are there any examples of good or bad practice which the Committee
should consider?
As remedies are not only about compensation
but also, perhaps even more, about stopping human rights violations,
non-judicial remedies may be very effective too. Publicity can
be an important means to this, as it often encourages a company
to stop its involvement in the violations. Considering the high
costs to obtain a judicial remedy, it is very important to encourage
the development of non-judicial remedies. In this respect it could
be considered to further strengthen the role of the National Contact
Point.
Professor Cees van Dam
May 2009
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