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Business, Human Rights Due Diligence and the Role of the State

20110927-012421.jpgThe Swiss coalition Corporate Jusice has managed to put regulation of business responsibility on the agenda of policy makers in their country. On Friday, they organised a public debate in Bern with MPs from the right and left, before an audience of over 150 people from industry and civil society. I was asked to speak about the findings of the expert group commissioned by ICAR, ECCJ and CNCA to examine human rights due diligence and the role of states (the report and data base can be found here). Below is the text of my speech. You can also download it here.

“Thanks to Recht ohne Grensen / Droit sans frontier for the invitation to speak here today. I understand that it is an important time in the policy debates on business responsibility here in Switzerland and I am grateful for the opportunity to contribute, to the extent that I can.

I will today be talking about what role the State can – and should – play in ensuring business respects human rights. My comments will be based on research conducted in 2012, but first a word about the international framework that has emerged since 2011.

In June 2011, the UN Human Rights Council unanimously endorsed the Guiding Principles on Business and Human Rights. The Guiding Principles are intended to guide implementation of the “Protect, Respect and Remedy” Framework developed by SRSG Professor John Ruggie during his mandate from 2005 to 2011. Since then, the approach outlined in the Guiding Principles has been integrated to the OECD Guidelines on Multinational Enterprises, the revised EU Strategy on CSR, the International Finance Corporation’s Performance Standards, which in turn are used by Export Credit Agencies in many OECD Countries. The same approach can be found in the OECD Guidance on Responsible Supply Chain Management of Conflict Minerals and in national legislation in the United States and the Democratic Republic of the Congo.

So, two years on, it appears that the Guiding Principles are being rapidly globalized through multilateral policy coordination and through national legislation. As I will describe below, one of the reasons for this is that the Guiding Principles fit well with domestic forms of regulation of business entities: the guiding Principles affirm that business enterprises have a responsibility to respect human rights, and that States have a duty to ensure that they do so. In other words, they re-affirm the hierarchy in law, in which the state is the legitimate source of authority and a company operates within that authority. The re-affirm the state’s role in protecting people and the environment and in regulating business to those ends. These are not new ideas, and they were not somehow invented by the Guiding Principles. But they are worth repeating, not least because the power and nature of multinational corporations tends to blind us to the fact that multinational corporations are, in very many ways, national animals.

What is new about the Guiding Principles – and perhaps its most important contribution to the debates on corporate responsibility – is that they elaborate a definition of what is means for a company to respect human rights. The definition is simple – it is based on the principle that one should “do no harm” – and it says simply that to meet its responsibility to respect human rights, a business should act with due diligence to ensure that it does not infringe on the rights of others. In other words, that a business is responsible for its impacts, which arise from is activities and relationships, and that it should take steps – due diligence – to ensure its activities and relationships do not have adverse impacts on people’s rights. The Guiding Principles make clear that this responsibility extends throughout a business’s operations and relationships globally; and that it is an independent responsibility of business, that is, a responsibility that exists independent of what states do or do not do.

Independent, but not isolated. Independent of the state’s duty to protect human rights, but not isolated from it. In fact, the Guiding Principles describe the duty of States to protect against abuses by businesses as including “appropriate steps to prevent, investigate, punish and redress” human rights abuse “through effective policies, legislation, regulations and adjudication.”

The Guiding Principles use the practice of due diligence as the operational means for business enterprises to respect human rights. But the specific options available to States to ensure the implementation of business due diligence are not specified. So the question arises, What can the state do to ensure that businesses respect human rights? What forms of regulation might best encourage or require business to conduct due diligence?

To answer that question, a group of three civil society coalitions – the International Corporate Accountability Roundtable (ICAR), the European Coalition for Corporate Justice (ECCJ) and the Canadian Network on Corporate Accountability (CNCA) – commissioned four experts (Professor Olivier de Schutter, Professor Anita Ramasastry, Robert Thompson, and me, Mark Taylor) to advise them in what become known the Human Rights Due Diligence Project.

The project sought to establish the extent to which the legal systems of States already make use of due diligence regulations to ensure that businesses respect established standards; and it had as its second objective to describe a range of regulatory options policymakers might use to take the next steps in ensuring businesses respect human rights.

The report is the culmination of Consultations throughout 2012 with lawyers and scholars from around the world – and all regions – on the question of how States already use due diligence regulations to ensure that the behavior of business enterprises meets social expectations. Based on a structured set of questions concerning how States ensure due diligence by business, we sought input from experts familiar with a variety of areas of substantive law in the legal systems of countries from every region, including the largest economies, as well as both civil law and common law jurisdictions. The objective of seeking multi-jurisdictional examples was to take into account differences among legal systems and cultures, and varying levels of economic development. The idea was both to see where commonalities lay, but also to show legal diversity, to allow contributors to point out distinguishing characteristics of particular regulatory systems in their areas of expertise. The Project ultimately obtained more than 100 examples of due diligence regimes in more than 20 States, drawn from a wide variety of regulatory sectors. The Authors were also able to draw on our own expertise in business and commercial law, human rights law, national and international criminal law, and environmental law. The report and those examples are available online at


The principal finding of the project can be summarized in four short points: First, that due diligence is commonly used by the legal systems of states around the world; second, that is found across legal traditions – from the US to China, from Australia to Nigeria, from Argentina to the EU and its member states, from common law countries to civil law countries; third, that in those legal systems due diligence is commonly used to assess business compliance with standards set in law; Fourth, we also found that those national due diligence procedures are consistent with the due diligence process described in the Guiding Principles and concluded that, on the basis of this coherence, it is possible to describe an emerging standard of due diligence procedure that is familiar in many jurisdictions and internationally.

I will not go into detail about due diligence procedure, but it is possible to summarize due diligence as a responsibility of a business consisting of three basic elements:

A responsibility to identify actual or potential impacts of its activities and relationships on human rights (this is a form of self-investigation by a business entity which involves identifying “human rights risks”, i.e. the risk that a business will infringe on the rights of others)

A responsibility to Prevent and Mitigate the impacts of its activities on the rights of others, basically taking action to avoid or mediate detected risks or actual harms

A responsibility to account for its impacts and efforts to respond to them, not least with respect to key stakeholders, i.e. those most affected by the business activities (in essence a spectrum of reporting or disclosure requirements)
These basic elements were consistent with what we found in domestic jurisdictions, as well as in other emerging standards being implemented at the international level: identify the risks to human rights (know what you are doing), do something about those risks, and be transparent about both the risks and what you are doing to address them.

In every country, there are a range of existing laws that protect human rights from business-related violations – everything from labour, consumer, environmental protection, or land tenancy laws do serve to protect human rights, even though they might be called something other than “human rights” in national law and policy. As I will describe in a minute, many of these also deploy forms of business due diligence to do so. However, while we found extensive evidence of State practice with respect to regulating due diligence, we also found little in the form of explicit reference to human rights per se in the variety of due diligence regimes which exist in the legal systems of the states we looked at. We were also reminded repeatedly by the experts and lawyers we consulted that in many cases these laws are poorly enforced.

In light of the evidence, we concluded that- first – the obstacle to regulating human rights due diligence by business must be considered rather low; that is, that the evidence of a high level of state practice of due diligence regulation reduced the threshold to regulating due diligence at the state level; and that – second – states could make far greater use of legal tools to ensure business respects human rights in general, and that companies implement due diligence for human rights in particular. Third, we suggest that while there is coherence in due diligence procedure, there is unlikely to be a single form of due diligence regulation that will be appropriate for every jurisdiction. Due diligence practice does look familiar wherever you go, and it will continue to do so when applied to human rights. But the regulations – the appropriate and effective “smart mix” of law and policy – that implement them in national law will be different.

In short, we argue that it is time the protection of human rights be given the same degree of attention which the law has given to other areas in which business causes harm or contributes undermining public goods. We argue that due diligence is the way to do so but that how States do so will be a function of the particular legal tradition in each jurisdiction, the way due diligence is commonly used in those legal systems, the nature of the business activity to be regulated, and the particular human rights contexts involved.

In every case, the role of due diligence regulation remains the same: to simultaneously 1. clarify in law the social expectations of business behaviour and 2. make it easier for regulators and the courts (as well as markets and consumers) to assess compliance.

Four Approaches to Regulating Due Diligence

The examples we looked at indicate at least four main regulatory approaches through which States can ensure human rights due diligence activities by business. Usually these approaches co-exist within the same jurisdictions and legal systems.
The first approach imposes a due diligence requirement as a matter of regulatory compliance. States implement rules that require business enterprises to conduct due diligence, either as a direct legal obligation formulated in a rule, or indirectly by offering companies the opportunity to use due diligence as a defense against charges of criminal, civil or administrative violations. For example, the courts use business due diligence to assess business compliance with environmental laws (US, CEPA), labor (China overseas workers), consumer protection (Germany) and anti-corruption laws (US FCAP / UK BA). Similarly, regulatory agencies regularly require business due diligence as the basis upon which to grant approvals and licenses for business activities (EIA in India and Ghana; Germany/construction). Anti-money laundering laws are increasingly global (e.g. OECD, China) their KYC or CDD provisions are forms of due diligence.

The second regulatory approach provides incentives and benefits to companies in return for their being able to demonstrate due diligence practice. For example, (Japan / Korea / Taiwan Green Procurement / US Federal Procurement re child labour; US Davis-Bacon re social dumping / wages in construction and fed contracts; Norway Pension Fund Global ethical screening) in order for business enterprises to qualify for export credit, labeling schemes or other forms of State support, States often require due diligence on environmental and social risks (the Dutch “Trade and Industry Tool” for ODA requires a company to submit a risk assessment of impacts; US Trade preferences Hope Act in Haiti)

A third approach is for States to encourage due diligence through transparency and disclosure mechanisms. States implement rules that require business enterprises to disclose due diligence with the intention that markets and society will attempt to constrain any identified harms. For example, (Aarhus Convention in EU re environmental info to stakeholders), securities laws in most countries, consumer protection laws (France, Argentina, Germany, EU) and reporting requirements for corporate social responsibility (Denmark, Norway, Spain, Malaysia) operate on the logic that information serves the interests and will prompt action by investors, regulators, and people who might be adversely affected by a business activity. (US California web site disclosure re DD for human trafficking, for co. over 100 mill).

A fourth category involves a combination of one or more of these approaches. States regularly combine aspects of these approaches in order to construct an incentive structure that promotes respect by business for the standards set down in the rules and ensures that compliance can be assessed in an efficient and effective manner. For example, administrative rules governing environmental protection, labor rights, consumer protection or anti-corruption may require business due diligence as the bases for a license or approval, and may also require regular reporting disclosure of due diligence activities by business. Enforcement of such rules can combine a combination of administrative penalty (fines), criminal law sanctions and the possibility of civil action, in which due diligence can be a defense.

In general, what these approaches show is that it is entirely possible for States to use their roles as regulators, purchasers, financiers, investors, and owners, to ensure the incentives for business are based on ensuring a business respect’s human rights, including through the use of due diligence.

The Reach of HR DD

I would like to say a word about what we found with respect to jurisdiction the reach of due diligence and its significance for jurisdiction:

As you all know, contemporary business activity is integrated across national and organizational boundaries. Companies operate through networks of suppliers, sub-contractors, franchisees, and distributors, often located in different States. The corporate group usually includes a number of separate legal entities, over which the parent company, which owns part or all of the stock, exercises variable degrees of control. These various entities may be incorporated or operate in different jurisdictions. As a result, most products and services available today may be said to be the result of collaboration between a number of business entities, entertaining contractual or investment links, and often escaping the jurisdiction of any single State.
The problem is that respect for legal standards, such as environmental protection, or labor rights, may be undermined by the creative use of business relationships, the various forms of business entities and the organization or structure of corporate groups.

Our analysis suggests due diligence is used by these different legal regimes to overcome the obstacles to effective regulation posed by complex corporate structures or trans-jurisdictional activities. Over time, the legal regimes governing due diligence activities have adapted their reach to the activities and relationships created by this integration of business enterprises.
In national legal systems, the responsibility of business enterprises to conduct due diligence does not end at the legal boundary of the individual company. Due diligence extends throughout the corporate group and in some cases to all business relationships globally. This is true in the national and international laws governing of anti-corruption (UK), workplace safety (China), conflict minerals (US), anti-discrimination against people with disabilities (US) and with respect to civil actions (and the EU Brussels I Regulation e.g. NL/Shell Nigeria both of which deploy due diligence in this regard).

The intent of such provisions is to prevent business enterprises from escaping responsibility by outsourcing risky activities to others through their business relationships. These laws approach responsibility in a way that recognizes the formal limits of the legal entity but does not allow the choice of organizational forms to create obstacles to addressing the potential harms or violations arising from the business activities of that entity. The purpose of the due diligence concept is to require a business to identify, prevent or mitigate, and account for, a harm or violation. By doing so across a firm’s business relationships globally, the scope of due diligence is designed to overcome other legal boundaries, such as the reality of separate legal entities, or separate jurisdictions. Its scope is, therefore, often determined first and foremost by the nature of the harm to be avoided.

With that I would like to conclude by adding that our report made a series of recommendations about practical steps legislators could take to both encourage and require due diligence by businesses. These ranged from the use of due diligence in licensing, procurement and export credit activities, in transparency and reporting requirements and all the way over to the place of due diligence as a defense for companies facing civil or criminal actions.
We heard earlier today that the problem with ensuring that business acts responsibly is that “everything is voluntary”. Based on my participation in the Expert Group I am convinced that era is coming to a close. It is now time for lawmakers to give at least as much regulatory attention to protecting human rights from abuse by businesses as they do the protecting against other public goods threatened by business activity. The question for policy makers is no longer whether to regulate, but how to regulate – both fairly and effectively – to protect human rights.

Thank you for your attention.”

Comments to “Menschenrechtsverletzungen verhinderen. Welche rolle spielen präventive massnahmen?” Recht ohne grenzen, Berne, 14 June 2013
Mark B. Taylor, Senior Researcher, Fafo Institute for Applied International Studies.

Image: Jared Rodriguez / Truth Out


The Web of Corporate Liability Just Shrank…a Bit

Court StepsThe U.S. Supreme Court yesterday ruled in Kiobel v. Royal Dutch Shell. The court found for Shell, which had defended itself against allegations it had contributed to the torture and murder of Ongoni activists by Nigerian authorities in the 1990s.

In its 35-page ruling, the court in effect rolls back the territorial reach of the Alien Tort Statute under which the suit was filed. The ruling in effect restricts access to U.S. Federal Courts by foreign victims seeking remedy for harms involving U.S. domiciled corporations, but it doesn’t shut the door entirely. It will no longer be enough for plaintiffs to show a company has mere commercial presence in the U.S. in order for a suit to proceed. But it remains unclear what the test will be in future. In his concurring opinion, Justice Kennedy indicated further clarity will be needed, and that means more litigation.

RFInterestingly, the court did not rule on the original question it heard last year, namely the question of the applicability of international human rights law to business entities (Kiobel involved allegations of crimes against humanity). In the decision, Chief justice Roberts writes that “[c]orporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices.” That can be read as implying an acceptance in principle of substantial jurisdiction, in other words that ATS suits against corporations may involve allegations for gross human rights violations. In his concurring opinion Justice Breyer noted that such cases are happening around the world already, and in support of his argument referred to an article written by Laws of Rule friends Robert C. Thompson, Anita Ramasastry and editor Mark B. Taylor on the emerging global “web of liability” corporations are slowly having to grapple with (that article was based on a study by the Fafo Institute on Business and International Crimes, for which Professor Ramasastry and Robert Thompson authored the final report. That project also led to advice in the form of the Red Flags website on liablity risks for companies operating in high-risk zones).

The ATS has never been a particularly effective tool for remedying corporate human rights abuses: the number of cases that have proceeded to trial is limited and those that do tend to settle out of court before a ruling is handed down. But there are so few remedies for corporate abuses that it has become a vital part of the accountability web. Indeed, the risk of litigation under the ATS has always been an important part of shaping business behaviour. The court’s decision has diminished the range of options for both purposes.

More on this soon. Watch this space.


Image: Jared Rodriguez


A Global Compact for Mercenaries?

20111216-153302.jpg“We’re not sure we want to participate in a process that legitimizes something we are not sure should be legitimate.”

That was the response of a top NATO government official a couple of years ago when I asked him whether his government would consider participating in the Montreux process, a Swiss government-led initiative to create standards for private military and security companies (PSCs).

It was a fair point. Any initiatives – even well well-intentioned ones – that contributed to green-lighting the transformation of old-style mercenary ‘companies’ into modern corporate entities needed close examination.

Then there were the concerns about process: how would a multi-stakeholder approach commonly used in corporate social responsibility (CSR) initiatives succeed in grappling with an industry serving the national security of member states? With the state’s monopoly over the use of force at issue, wouldn’t it be better to just push for national regulation instead of a voluntary global code?

Fast forward a few years to 2010 and the Swiss government’s multi-stakeholder approach delivered an International Code of Conduct (ICoC) for Private Security Service Providers. The ICoC does not create new law, but it does a remarkably good job of laying down the minimum standards for PSC behavior. It sets out standards for PSC compliance with International Humanitarian and Criminal Law, and international human rights standards for the use of force. It explicitly prohibits killings and sets a higher standard against torture, forced labour and child labour for private companies than those adhered to by many of their state agency clients.

Perhaps most important, the Code provides the normative principles necessary to reduce or eliminate the legal grey areas in which the industry has grown. It makes crystal clear the obligations of PSCs to abide by existing national and international laws, report crimes to – and cooperate with – national and international authorities, respect local communities and its own employees and so on. The Code explicitly prepares the ground for additional national regulation, while at the same time deploying international human rights standards for business entities to ensure businesses respect human rights in the absence of national laws. It is explicit in its reference to legal norms for regulating business, such as due diligence, and negligence standards, such as reasonable steps to avoid harm. The Code consistently uses words such as compliance, accountability and certification.

There are gaps in the Code: it mentions privacy, but it does not really deal with the growing phenomenon of privatized surveillance, both as corporate espionage but also of citizens on behalf of state or corporate clients. Still, it is fair to say that the ICoC does an exemplary job of laying the foundation for closing the jurisdictional loop-holes (not least over legal entities operating across borders) in which the more militarized elements of the sector have been operating since the end of the Cold War.

But will it succeed in putting the private security genie back into some sort of regulatory bottle?

The start of an answer to that question will be decided this week, when industry, governments and civil society gather again in Montreux for a final round of negotiations on the Charter of the Oversight Mechanism (OM) of the ICoC. At issue this week is whether, in the process of institutionalizing, the parties can agree to establish the OM as independent enough to be effective.

Much of the Charter text, or Articles of Association (the OM will be established under Swiss law as not-for-profit organization), has been agreed. But the areas of disagreement in the latest draft betray real nervousness among the stakeholders about creating an independent and effective secretariat.

For example; as it presently stands, the charter empowers the OM to receive complaints about violations of the Code from third parties, including victims, but not to adjudicate these or to recommend remedies. Complaints will be a key source upon which to assess compliance with the Code and de-certification is possible in the present draft. And the OM is not powerless when it comes to remedies: through referral powers, the OM can help find effective remedies appropriate for a particular case and in effect veto ineffective remedies.

But, as it presently stands, the text of the Articles means the OM itself is unlikely to be able to assess reparations to the affected parties. The power to do so would be an important gain for victims, many of whom will face closed doors in their attempt to get access to domestic remedies, like the courts. The Code is clear that it cannot replace domestic judicial remedies, whether civil or criminal, but the Articles should be equally clear that it offers an alternative non-judicial option with teeth.

Similarly, there seems to be doubt as to whether to allow a secretariat to the OM powers to independently monitor, or launch field missions. There is a desire among some to locate that authority with the board, rather than a secretariat.

That would be a mistake. A Board’s job is to govern, for example to approve membership applications, de-certify violators of codes of conduct, etc. Final decisions or actions approved by the Board should be based on recommendations of a secretariat. But to make that function effective means empowering a secretariat to do its job independently, which is to be operational, to monitor and to service the decision-making of the board with information and recommendations.

A secretariat reports to its board, but its functional independence gives the Board a certain amount of plausible deniability with the members it must to some extent police. Placing basic operational decisions to a multi-stakeholder board is just asking for conflict and paralysis. And a secretariat without basic executive independence with respect to its core functions – monitoring, remedy procedures, certification procedures – is a recipe for ineffectiveness and rapidly decreasing levels of legitimacy for the whole project, both from within and without industry.  

The  issue of legitimacy is central, both for whatever institution is established to govern the ICoC as well as for the industry as a whole. For an industry with a very serious deficit in that department, keeping civil society on board will be vital. Doing so will likely require this week’s deliberations in Montreux to succeed in crafting an OM that in effect adds an important element to the emerging regulatory mix that may one day govern the private security industry.

If that fails to materialize, the risk is that ICoC will quickly evolve into little more than a ‘Global Compact for Mercenaries’ – a place where there is a lot of emphasis on learning, but very little evidence of change, little scope for assessing compliance and no contribution to ending impunity more broadly. Participants at this week’s meeting in Switzerland would do well to avoid that outcome.   


Image: Jared Rodriguez / TruthOut


Business, Conflict and Foreign Policy

20110927-012406.jpgThe attacks on the Statoil-BP-Sonatrach facilities at In Amenas in Algeria last month were both shocking and tragic. They were also a reminder of the risks of operating in so-called high-risk environments.

Companies like BP and Statoil have learned the hard way what it means to manage non-financial risk, both for their own employees as well as for those people who may be affected by their operations. For many companies, those lessons have meant changes to how they manage security risks to their employees, the risk of participating in corruption, and the risk of infringing on the human rights of people who might be affected by their operations. Companies operating in situations of conflict, or widespread state repression, face all of these risks at once.

The lessons learned by companies operating in these complex environments have largely been lost on governments around the world. For most of the past forty years, countries have been competing to gain access to attractive markets for their companies and to attract investment to their domestic markets from abroad. Government bureaucracies have been told to facilitate trade and investment. Unfortunately, this has come at the neglect of building the capacity to respond to the challenges of domiciled businesses operating in high-risk situations. With few exceptions, officials have had little cause to consider the risks of state-owned or domiciled companies being involved in far-off conflicts.

There are several reasons why this state of affairs must change. The first is that market forces demand it: foreign investment flows have recovered from the shock of the financial crisis are focused now as never before on securing natural resources (petroleum, minerals, arable land, etc), many of them in developing or conflict affected countries. At the same time, foreign companies with questionable records from areas of conflict or repression are investing in places like Norway and other OECD jurisdictions. Both trends will create demands for a response from policy makers from those countries, a demand for which they are at present mostly unprepared.

A second, and related, reason for action is the very real threat that, if left alone, the security and human rights risks will discourage investment in developing countries. In 2010, the United States introduced reporting requirements for companies using conflict minerals from the Democratic Republic of the Congo. The rules affected a huge swath of global high-technology industry, those producing chips, computers, cell-phones, and airplanes. As I have written here before, the rules were a good thing and well designed. But because of delays in implementing them many companies were unsure how to comply and they decided to temporarily suspend buying minerals from DRC. That affected the livelihoods of artisanal miners, pushing them deeper into vulnerability and poverty. The lesson was clear: without clear guidance from governments, business will continue to be unsure of what is acceptable behaviour in conflict situations.

The third reason is that a government response to challenges of businesses operating in conflict zones abroad is necessary because business cannot do it alone. Conflict raises issues of national security. Where national security is at issue, even the largest businesses may have little influence over government decisions. In some cases, that may simply be an excuse for a business to do nothing while a government creates a ‘business-friendly’ environment by repressing or attacking its own people. But for those businesses that want to do the right thing, they face a real dilemma: how to ensure security for their staff and property, while at the same time not contributing to violations of the human rights of others?

There have been a range of multi-stakeholder dialogues and other corporate social responsibility initiatives – such as the Voluntary Principles on Business and Human Rights – that have attempted to address these dilemmas. But the problem of business in conflict cannot be solved by any one company alone, or by privatised policy processes.

All states have a duty under international law to protect human rights. That duty includes protecting people against abuses by businesses operating abroad. Norway and Russia supported the United Nations process led by Professor John Ruggie which clarified the roles for states and business in protecting and respecting human rights. In 2011, that process resulted in a significant diplomatic and normative success at the Human Rights Council in Geneva.

As part of that process, Professor Ruggie held a discussion among Member States about what to do about business in conflict zones. The Norwegian Peacebuilding Resource Centre (Noref) supported my work to assist that process. But since the report from that process was published, little has happened on the issue of business in conflict zones and the political will – from Norway and elsewhere – seems to have waned.

That has to change. The only hope of solving these dilemmas is to clarify in domestic law the expectations we have of businesses operating abroad. States should start by focusing on business in conflict zones. In parallel, governments are going to have to engage in bilateral and multilateral dialogue to agree on ways to meet international law obligations. The basic outlines of that framework already exist in Ruggie’s report. The challenge for governments is to make it effective in practice.


This post is a slightly revised version of an op-ed in today’s print edition of the Norwegian financial daily Dagens Næringsliv

Image: Jared Rodriguez / TruthOut


Ethical Procurement is a No-Brainer…and Legal

2011-10-25 23.02.18In Oslo this week the debate around business and human rights seems to be heating up. It came to the attention of the Norwegian newspaper Dagsavisen that Lundin Petroleum was under investigation for its alleged participation in war crimes in the Sudan. Today, Erling Sande, an MP from the governing coalition partner Senter Partiet, reacted saying the lack of rules governing business respect for human rights was simply unacceptable and the government should take steps to fix the gap in the regulations.

Also in today’s edition of Dagsavisen, news that city politicians in Oslo are pushing for global security provider G4S be excluded from Oslo’s procurement universe. The reason? Reports that G4S provides security to Israeli settlements on the West Bank, in contravention of international law.

The basis for such a step by the Oslo authorities is that the city has recently added a clause to its standard contracts requiring service providers to “respect internationally recognized human rights in their own operations and supply chains.” But Stian Berger, Conservative party head of Oslo’s city council, told Dagsavsien he believes that it would be going too far to exclude companies like G4S for breach of this commitment, and he seemed to suggest that it might even be in contravention of the laws governing public procurement. Even Labour party city politicians seemed uncertain about what was possible.

Let’s be clear: it is factually and legally incorrect to suggest that companies cannot be excluded from government goodies on the basis of a poor human rights record.

In fact, the government of Norway is already doing it, through ethical screening of its national pension fund and human rights requirements imposed by its export credit agency GIEK. It is even developing similar approaches to government-wide socially responsible procurement.

Norway is not alone in this. There are an increasing number of public authorities, both local and national, that are imposing human rights and other ethical requirements through procurement rules. Most already do so for issues such as corruption – both here and abroad – and there is no law preventing them from doing so with respect to human rights.

In a report on the regulation of business due diligence for human rights, which I helped draft and launch at the UN Human Rights Council in early December, we describe how the EU is evolving precisely such a regime. Here’s what we wrote in the section on “Due Diligence as a Requirement for Doing Business with Government”:

“Many jurisdictions allow public authorities to impose human rights due diligence obligations on companies seeking to be awarded public contracts. This is the case, for example, in the EU. The 2002 White Paper of the Commission on Corporate Social Responsibility already mentioned that “access to public procurement, conditional on adherence to and compliance with the OECD guidelines for multinational enterprises, while respecting international commitments could be considered by EU Member States and by other States adherent to the OECD Declaration on International Investment.” [The revised EU CSR Strategy is available here.]

The existing legislation on public contracts in the EU now confirms that environmental and social clauses may be included as criteria for the award of public contracts. The applicable instruments also provide that in the selection of tenderers, certain disqualification clauses will apply, or may apply if the public authorities so choose. Article 45(1) of Directive 2004/18/EC provides that any candidate or tenderer, who has been the subject of a conviction by final judgment for participation in a criminal organization, corruption, fraud, money laundering, as defined in the relevant EU instruments, shall be excluded from participation in a public contract.

Under Article 45(2), any economic operator may be excluded from participation in a contract, inter alia, where that economic operator “has been convicted by a judgment which has the force of res judicata in accordance with the legal provisions of the country of any offence concerning his professional conduct.” If national law contains provisions to this effect, this may include non-compliance with environmental legislation, or the non-observance of national provisions implementing instruments related to anti-discrimination where such non-compliance has been the subject of a final judgment or a decision having equivalent effect. At present, these rules do not explicitly make the award of public contracts conditional upon human rights due diligence obligations; nor do they authorize the EU Member States to impose such conditions, unless they are part of social or environmental conditions. However, such developments may take place in the future, and the existing legislative framework in the EU could easily be adapted to that effect.”

In short, there is no legal obstacle to including human rights in ethical procurement rules, nor in excluding businesses who don’t meet human rights standards. The only obstacle is politicians who would rather drag their feet.


Image: Jared Rodriguez / TruthOut

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