Memorandum submitted by Leigh Day &
Co.
SUMMARY OF
SUBMISSIONS
This paper addresses the following issues of
which we have direct experience, and which arise from the list
of questions in the call for evidence:-
1. Application of the Human Rights Act to
businesses to which public functions have been contracted out
by public authorities.
2. Effectiveness of judicial mechanisms
for holding UK business to account for human rights violations
committed overseas.
3. Funding issues relating to 1 and
2 above
4. Effectiveness of non-judicial mechanisms
for holding UK business to account for human rights violations
committed overseas.
5. Possible legislative, judicial and non-judicial
changes that could be introduced in relation to 1 and 2 above.
1. APPLICATION
OF THE
HUMAN RIGHTS
ACT ("HRA") TO
BUSINESSES TO
WHICH PUBLIC
FUNCTIONS HAVE
BEEN CONTRACTED
OUT BY
PUBLIC AUTHORITIES
Section 6 of the HRA provides that the
HRA applies only to "public authorities". No definition
is provided in the HRA, save for stating that courts and tribunals
are public authorities for the purposes of the act. The lack of
provision of guiding principles and/or non-exhaustive list of
bodies considered to be public authorities has led to litigation
producing anomalies and the question of whether a person or body
is a public authority for the purposes of the HRA can be very
difficult to determine. In 2003, the House of Lords confirmed
that there was no single test of universal application to distinguish
what is or is not a public authority.[464]
The anomalies produced are illustrated by the
case of Johnson & others v LB Havering; YL v Birmingham
City Council[465]
in which the House of Lords held that an individual placed in
a privately-owned care home by a local authority was not a public
authority. This result means that Mr A, who through no choice
of his own, is placed in a privately-run care home by his local
authority loses the protection of the HRA; yet Mr B who is placed
in a local authority run care home retains the protection. This
anomaly required addressing through primary legislation (see Health
& Social Care Act 2008, brought into force on 1 April
2009).
A key area in which the protection of the HRA
fails (and in which Leigh Day & Co are often instructed) is
in relation to private companies running immigration detention
centres and providing escort services for removals and deportations.
There is a plethora of complaints and litigation surrounding the
maltreatment of immigration detainees by these private companies,
including multiple allegations of assault, inhuman and degrading
treatment, and deprivation of liberty. We refer you to the Medical
Justice report "Outsourcing Abuse."[466]
The Home Office argue that it is not responsible for the actions
of the private companies and hence rigorously defend HRA claims,
and the companies themselves state that they are not subject to
the HRA. This issue has yet to be determined by the Court, and
highlights the unnerving ability of public authorities to potentially
contract out of their human rights obligations.
2. EFFECTIVENESS
OF JUDICIAL
MECHANISMS FOR
HOLDING UK BUSINESS
TO ACCOUNT
FOR HUMAN
RIGHTS VIOLATIONS
COMMITTED OVERSEAS
Criminal Accountability
Thor Chemicals (see further below), a UK multinational
involved in the manufacture of mercury-based chemicals, shifted
its operations, lock stock and barrel to Natal. This was after
serious concerns had been expressed by the HSE. 40 South
African workers were poisoned, including 1 fatality. Thor
was charged and fined the equivalent of approximately £3,000 by
the Pietermaritzburg Magistrates. At the time, other companies
commented that the paltry fine made it difficult to justify health
and safety expenditure to shareholders.
In the event of no action being taken in the
local courts, it is possible, under the International Criminal
Court Act 2001, for a prosecution to be brought against individual
UK citizens responsible for specified offences overseas, including
"aiding and abetting" the commission of "crimes
against humanity" and "torture". Officers and employees
of UK businesses that have engaged in conduct ancillary to such
offences could therefore be prosecuted under the Act. To date,
we are unaware of any such investigations having been undertaken.
Civil Action in the UK courts
Case Study: BP, a UK multinational, was involved
in the exploration and exploitation of oilfields in the Department
of Casanare, Colombia, in the early 1990s. A pipeline was built
by a locally registered company (OCENSA) to transport the oil
from the oilfields to a port on the Caribbean coast. Civil claims
were initiated in Colombia against OCENSA by peasant farmers whose
livelihoods had been destroyed as a result of environmental damage
to their land, which they claimed was caused by the construction
of the pipeline. The claims were stifled as a consequence of the
inadequate Colombian justice system and the perilous position
of human rights lawyers in Colombia.[467]
The lawyer acting for the farmers ultimately sought asylum in
the UK following increased threats from paramilitary groups due
to her involvement in the case. The farmers subsequently instructed
Leigh Day & Co and a successful settlement was eventually
reached with BP by way of a mediation in June 2006.
A ruling of the ECJ[468]
confirmed that the UK courts do not have jurisdiction to stay
proceedings commenced against a UK-domiciled corporation, on the
grounds of forum non conveniens. This is a welcome development
given the substantial resources and court time wasted on this
issue in the litigation against Cape PLC, Thor Chemicals[469]
and Rio Tinto.
Claims directly alleging human rights violations
cannot be brought in the UK against non-state entities. This contrasts
for example with the position in the US, where a federal statute,
the Alien Tort Claims Act, specifically provides for such claims.[470]
However, in light of Owusu and the recent coming into force of
the Rome II Regulation, claims arising overseas will invariably
be governed by local (foreign) law.[471]
Consequently, should the local law provide for human rights causes
of action, it should be possible to pursue these in the UK courts.
Overseas operations of UK businesses are usually
conducted through local subsidiaries. In general, in order for
the UK courts to have jurisdiction, the UK parent company will
need to be sued. However, in view of the "corporate veil",
the parent is not generally liable for the wrongdoing of its subsidiaries.[472]
In light of this well-established precedent, the focus in such
cases has been on the direct negligence of the parent company
itself in causing the harm in question. This type of approach
is infinitely more complex, factually, than one entailed in a
claim against a local operating company. The position is graphically
illustrated by the RTZ tree (appendix 1) researched and produced
for the Connelly case (in which the parent, at the top of the
tree, was sued in respect of damage arising at Rossing Uranium
Ltd, the entity at the bottom of the tree).
This increased level of complexity has important
consequences. First, significantly more resources are required
to investigate the relationship between different entities within
the corporate group. Secondly, this makes the prospects of success
more uncertain. Such cases are also necessarily subject to the
funding considerations described below.
Case management procedures for group actions
enable cases to be run on a more cost-effective manner than a
multiplicity of individual cases. However, the need to commence
claims within the requisite limitation periods - whichever limitation
law applies - and the extent to which individual particulars are
required procedurally, tends to make cases prohibitively expensive.
Class action legislation of the type that exists for example under
Australian federal law (or the law of Victoria) would enable an
issue to be resolved through a single representative claim, whilst
at the same time suspending limitation.[473]
3. FUNDING ISSUES
Access to justice against businesses is subject
to the ability of individuals or communities to fund legal proceedings
against large corporations and the fundamental inequality of arms
that this engenders. The vast majority of individuals simply cannot
afford to risk litigating because of the costs risks involved.
Due to the erosion of the availability of Legal
Aid over recent years by stringent means testing and by its removal
from certain fields of law such as personal injury, often the
only available mechanism for funding legal cases is a Conditional
Fee Agreement (CFA). CFAs do not protect an individual from adverse
costs risks, and the practical reality is that it is only feasible
to act for clients under a CFA when the prospects of success and
the overall value of the claim are sufficiently high to persuade
a third party litigation funder to support the case.
In order to act under a CFA, legal representatives
have to possess the necessary resources (which are invariably
huge in the case of a large group action) to fund the case pending
its conclusion, a risk that represents a significant disincentive
for all but a few firms to carry out this type of work. In spite
of these hazards, CFAs have been subject to criticism by politicians
who seem to have been successfully lobbied by business, creating
a climate which risks further distancing the individual from effective
access to justice.
One further potential mechanism to assist access
to remedies is the Protective Costs Order (PCO). PCOs limit or
extinguish the risk of having to pay adverse costs. PCOs are available
in limited circumstances where public law proceedings brought
are considered to have a wider public interest. Although still
relatively rare, the Courts have gradually indicated a growing
acceptance of PCOs to facilitate public interest litigation (particularly
in the environmental context). For example the proceedings against
the SFO in the BAE case where brought with the benefit of a PCO
(and a CFA to cover our legal costs). Leigh Day & Co has subsequently
applied for PCOs in over 15 public law cases, of which approximately
95% of applications have been successful.
That said, PCOs offer no certainty and although
such orders are in principle available in private law proceedings
against non-public authorities, there is to our knowledge only
one occasion on which a PCO has been made (namely in proceedings
directly linked to the later BAE public law case).
4. EFFECTIVENESS
OF NON-JUDICIAL
MECHANISMS FOR
HOLDING UK BUSINESS
TO ACCOUNT
FOR HUMAN
RIGHTS VIOLATIONS
COMMITTED OVERSEAS.
In light of the difficulties associated with
judicial remedies outlined above, individuals and organisations
have often had to look to "soft law" mechanisms as an
alternative source of corporate accountability. Among these the
OECD Guidelines are the most prominent. The Guidelines were adopted
by all thirty OECD Countries and eight non-members in 1976 and
were updated in 2000. Observance of the Guidelines is voluntary
and not legally enforceable".[474]
Significantly, among the principles companies are asked to take
into account is to:
"Respect the human rights of those affected
by their activities consistent the host government's international
obligations and commitments."
Governments adhering to the Guidelines have
been obliged to set up "National Contact Points" ("NCPs")
to promote the Guidelines and 'contribute to the solution of problems
which may arise'.
Since 2007, the British Government has demonstrated
a real commitment to a more robust implementation of the Guidelines.
It has found that two British companies breached the Guidelines
because of their activities in the DRC. The first company, Afrimex
(UK) Ltd, is a mineral trading company which sourced minerals
from the DRC occupied by rebel troops until 2003, and according
to the NCP, it thereby contributed to the conflict.
The second company, DAS Air, was a UK airline
which was found to have broken the Guidelines when it flew into
Eastern DRC to transport minerals between 2000 and 2001.
The British Government has stated that the OECD Guidelines are
their leading CSR tool and that it "expects all UK businesses
to be able to prove they meet the OECD Guidelines".[475]
The Guidelines are criticised on three principal
grounds:
(i) They are voluntary and any decision cannot
be legally enforced against the company;
(ii) They lack independence from Government and
thus are not perceived as impartial;
(iii) The NCP has no power to award damages or
to otherwise sanction companies who are guilty of misconduct.
Leigh Day & Co is of the view that these
criticisms are important and should be addressed. The Government
has recently shown a willingness to improve the implementation
of the Guidelines but much must be done. In particular, the implementation
of the Guidelines should be conducted by a body which is independent
of Government, sufficiently well resourced, staffed by legally
trained personnel and given significant investigative powers.
Secondly, the decisions of an NCP should be legally binding upon
the companies and consideration should be given to giving the
NCP the power to award damages and/or fine companies who are in
breach.
Guidance
The JCHR "Call for Evidence" asks
whether the UK Government gives adequate guidance to UK business.
It is our view that this is a major cause for concern and many
responsible businesses are now demanding clearer guidance as to
how they conduct business in the developing world and in conflict
zones in a way which respects human rights principles. Currently
the Government states that it expects compliance with the OECD
Guidelines but offers no guidance at all as to how these instruments
should be implemented and considered by British business.
Furthermore, there exists a plethora of voluntary
initiatives, codes of practice and CSR principles but it often
remains entirely unclear how these principles apply in specific
situations or industries. In addition, apart from the OECD Guidelines,
no international instrument benefits from a complaints mechanism,
which is vital in order to encourage the compliance of all business.
Leigh, Day & Co supports the CORE Coalition's proposal for
a UK Commission on Business, Human Rights to offer greater
guidance to business and to provide a more robust complaints mechanism
for those cases which cannot be dealt with in the civil courts.
5. RECOMMENDATIONS
In light of the issues raised above, Leigh Day
& Co suggests the following possible legislative, judicial
and non-judicial changes for consideration by the Committee:
(i) Amendment of UK legislation to make business
subject to ICC provisions where an offence is authorised or permitted
by (a) the board (b) a "high managerial agent" of the
business; (c) as a result of a "corporate culture" within
the business.[476]
(ii) An inference, rebuttable with the onus
on the defendant, that a parent company does, as a matter of fact,
have control over the conduct of its overseas subsidiaries.
(iii) Introduction of opt out class actions
into UK law.
(iv) Extension of the HRA to cover all publicly
funded functions, including businesses to whom functions have
been contracted out by public authorities, such as private companies
running immigration detention facilities and providing escort
services during immigration removals and deportations; and private
businesses with publicly funded safety obligations, such as Railtrack.
(v) Expansion of the acceptance/use of PCOs
to all cases where the interests of justice and need for equality
of arms require it, including private law proceedings against
private companies.
(vi) Unification of the various soft law initiatives,
codes of practice and principles for corporate accountability
into a single independent body or commission which would have
the dual roles of i) providing detailed guidance to business as
to best practice when conducting business in the developing world
and ii) offering a robust complaints mechanism and remedies for
victims of those companies who have flouted human rights standards
when conducting business. We would support the CORE Coalition
proposal for a UK Commission on Business, Human Rights and the
Environment, however, we accept that a good deal of thought would
have to be given as to how this would work in practice.
Leigh & Day
April 2009
464 See Aston Cantlow & others v Wallbank [2003]
3 All ER 1213 Back
465
3 WLR 112 Back
466
Available at http://www.medicaljustice.org.uk/images/stories/reports/outsourcing%20abuse.pdf Back
467
See, for example, the Law Society's report on its August 2008 International
Human Rights Mission to Colombia, due to be launched on 6 May
2009 Back
468
Owusu v Jackson and Others Case C-281/02 Back
469
Sithole & Others -v-Thor Chemicals Holdings Ltd and Another
(Times Law Report dated 15 February 1999) Back
470
Doe v Unocal Corp., 963 F. Supp. 880 (C.D. Cal. 1997).
An action by Burmese villagers alleging complicity by Unocal in
human rights violations perpetrated by the military around a pipeline. Back
471
Rome II applies where (a) proceedings are commenced from 11 Jan
2009 and (b) events giving rise to damage occurred after
19 Aug 2007. Back
472
Adams v Cape Industries Plc [1990] 2 WLR 657; the "veil"
can be "lifted" in the event of fraud on the part of
the parent or an agency relationship [between parent and subsidiary]. Back
473
The value of class action legislation in increasing access to
justice can be illustrated, for example, by the fact that, apart
from in the US, legal action against Merck Inc, for compensation
for heart attack and strokes suffered following the use of anti-arthritic
drug Vioxx, has only been launched in Victoria (Australia) and
Canada. Back
474
Para 1of Concepts and Principles of the OECD Guidelines. Back
475
Press release. Dept for Business Enterprise & Regulatory Reform.
27 August 2008. Ref 2008/183. Back
476
Section 12.3 of the Australian CriminalCode Back
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