Editor's Note: Alexandru Rares Tofan recently graduated with an LLM in Transnational Law from King’s College London where he focused on international human rights law, transnational litigation and international law. He is currently an intern with the Doing Business Right project at the Asser Institute in The Hague. He previously worked as a research assistant at the Transnational Law Institute in London on several projects pertaining to human rights, labour law and transnational corporate conduct.

Human rights require meaningful enforcement mechanisms. This idea stands at the foundation of the United Nations’ approach to handling corporate human rights abuses.[1] An individual that has suffered a human rights harm must freely enjoy access to justice in order to seek the reparation of that harm. The third pillar of the UN Guiding Principles on Business and Human Rights (UNGPs) focuses exclusively on this need to secure access to effective remedy for victims. The remedial process described therein comprises both the procedural aspects of obtaining a remedy for an adverse human rights impact and the substantive outcome of those procedures. This process demands the involvement of all actors including governments, corporations and civil society.

The commentary to Principle 27 of the UNGPs notes the particularly important role that national human rights institutions (NHRI) play in providing access to effective remedy. In his 2008 Report, the UN Special Representative on Business and Human Rights referred to them as the ‘lynchpins’ of his framework’s entire system of grievance mechanisms. The reasons justifying this optimistic outlook are not difficult to uncover. NHRIs are state-based but independent institutions that have a constitutional or legislative mandate to protect and promote human rights.[2] They are focal points of expertise on human rights and they enjoy a presumption of neutrality and objectivity. Their unique positioning at the crossroads between governments, corporations and civil society further enables them to behave as crucial links between these actors. In terms of providing access to remedy, the 2010 Edinburgh Declaration envisions the participation of NHRIs as either direct or indirect. Direct participation refers to the handling of complaints relating to business and human rights cases. An NHRI may for instance assume the role of an investigator, mediator or conciliator. Indirect participation on the other hand refers to promoting education, monitoring, capacity-building, advising and issuing recommendations inter alia. In this sense, the NHRI becomes a centre for expertise on human rights and a hub for the exchange of information. The question nevertheless remains if and to what degree NHRIs have in practice assumed this role in the context of business and human rights.

This five-part series looks at the extent to which the the Access to Remedy Pillar of the UNGPs has been fulfilled through the daily practice of the Dutch, South African, Romanian, Australian and Indian NHRIs. Ultimately, this series hopes to unravel whether the chosen NHRIs have assumed the role envisioned for them under the Principles and the differing ways in which they may have done so.

[1] Jonathan Drimmer and Lisa J Laplante, ‘The Third Pillar: Remedies, Reparations, and the Ruggie Principles’ in Jena Martin and Karen E Bravo (eds), The Business and Human Rights Landscape: Moving Forward, Looking Back (CUP 2016) 318 and op. cit. 12.

[2] UNDP and UN OHCHR, UNDP-OHCHR Toolkit for Collaboration with National Human Rights Institutions (2010) 2.

On Thursday (2 November), the T.M.C. Asser Instituut hosted a roundtable on the role of financial institutions in ensuring responsible business conduct and, in particular, fostering respect for human rights. The discussion focused on the Dutch Banking Sector Agreement on international responsible business conduct regarding human rights (DBSA or Agreement), including details of its key features and the practicalities of its implementation, alongside the theme of responsible banking more generally.

Panellists:

• Ruben Zandvliet: Advisor Environmental, Social, and Ethical Risk & Policies at ABN Amro
• Benjamin Thompson: Program Officer, Business and Human Rights at PAX
• Tessel van Westen: Senior Policy Officer International CSR Unit, Dutch Ministry of Foreign Affairs
• Maryse Hazelzet: Advisory Sustainability at NVB
• Ryan Brightwell: Researcher and Editor at BankTrack

Our panellists explored the background to the DBSA, negotiated and agreed under the auspices of the Social and Economic Council of the Netherlands (SER). The speakers emphasised the cooperative multi-stakeholder approach to decision making (known as the Polder model) under the SER that led to the adoption of the Agreement by its signatories, including the Dutch government, the Dutch Banking Association (NVB), leading Dutch banks, trade union federations and certain international civil society organisations. Each panellist gave their organisation’s perspective on the hurdles apparent prior to and since conclusion of the DBSA (such as action on sustainability that appeared to be at odds with competition law constraints), their views of the aims and expectations of the DBSA (including better transparency, due diligence processes and complaints mechanisms) as well as their organisation’s role in the DBSA’s implementation once agreed.

The speakers discussed the prospects for and challenges in respect of the implementation of the DBSA. While private codes of conduct may be precise and verifiable in terms of the expected conduct, they are often set below the requirements of international law. Further dialogue is required between the parties to ascertain what conduct on the part of the banks is consistent with international obligations. The panellists expressly recognised the advantages of referencing international standards applicable to banking (such as more stringent applicable human rights standards), however in need of implementing provisions they may be. Among other objectives, the Agreement aims at solving the interpretative ambiguities inherent in the UNGPs. There are however many challenges. The speakers explored some of these difficulties, for example relating to the nature of the relationships between banks and their clients, or pertaining to the specificities of the financial industry such as in the case of syndicated loans. Further difficulties discussed included banks’ lack of visibility of the value chain in any given transaction and the ethical and compliance issues arising in respect of financing activity affecting certain industries including, for example, the arms trade and sex work.

The discussion also touched on the next steps and specific ongoing processes in implementing the DBSA in order to achieve positive human rights-consistent outcomes. At this point, the panellists stressed the ‘work in progress’ status of the DBSA and agreed that it would be premature to speculate at this point whether the DBSA will achieve tangible, positive outcomes. There was, however, a general consensus on the need for a continuation of the collaborative multi-stakeholder approach leading to the adoption of the DBSA – a novel approach in the banking industry that was largely seen to be “working”, at least in respect of helping different stakeholders understand one another’s concerns. The panellists generally agreed that multi-stakeholder dialogue should permeate the way forward vis-à-vis the implementation of the DBSA; ways should be found to further integrate (particularly civil society and local) stakeholders into the monitoring and decision-making processes of banks as well as when deciphering new ways to increase leverage in relation to borrowing companies in order to increase human rights compliance “on the ground”. The suggestion that clear guidelines for banks and companies should be set in respect of their human rights responsibilities was welcomed, and particular tools (including a working group) being set up to this end were noted in the discussion. The speakers emphasised the importance of (and the need to improve) the banking sector’s own internal due diligence and client engagement processes.

The roundtable concluded with a lively and thought-provoking discussion in the Q&A section between the speakers and audience touching on a number of topics including (inter alia and in addition to some of the themes mentioned above): the desirability, nature and potential functionality of binding due diligence legislation for banks; human rights-related arbitration and applicable law clauses in contracts; and how new digital technologies (such as blockchain) could help address problems and difficulties faced by banks carrying out human rights due diligence. 

The panellists viewed the path ahead as undeniably challenging given certain practical questions that need answering and the further work required with respect to the implementation of the Agreement – yet they ultimately agreed that this approach could have the potential to improve banks’ human rights performance. The speakers now continue to be engaged in the operationalization of the Agreement, which incorporates a timeframe for evaluating its impact and effectiveness.

Editor’s note: Shamistha Selvaratnam is a LLM Candidate of the Advanced Masters of European and International Human Rights Law at Leiden University in the Netherlands and a contributor to the Doing Business Right project of the Asser Institute. Prior to commencing the LLM, she worked as a business and human rights solicitor in Australia where she specialised in promoting business respect for human rights through engagement with policy, law and practice.

The introduction of the UK, Australian and NSW Modern Slavery Acts are part of the international trend towards greater regulation and transparency of modern slavery in corporate supply chains and operations. For example, Canada has recently introduced a modern slavery bill and Brazil introduced a ‘dirty list’ to name and shame companies that engage in slave labour back in 2004. This last blog of a series of articles dedicated to the global modern slavery developments focuses on the modern slavery developments in jurisdictions other than the UK and Australia.  

California

In 2012, prior to the introduction of the UK Modern Slavery Act, the California Transparency in Supply Chains Act 2010 (CTSCA) (the Californian Act) came into force. The Californian Act requires retail sellers or manufacturers that are doing business in California[1] with annual worldwide gross receipts in excess of $100,000,000 to make certain disclosures. In particular, they must disclose information relating to five areas: verification, audits, certification, internal accountability, and training. They must disclose to what extent (if any) they:

1. Engage in verification of product supply chains to evaluate and address risks of human trafficking and slavery.
2. Conduct audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains.
3. Require direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the country or countries in which they are doing business.
4. Maintain internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking.
5. Provide company employees and management, who have direct responsibility for supply chain management, training on human trafficking and slavery, particularly with respect to mitigating risks within the supply chains of products.

Disclosures must be made on the company’s website with a ‘conspicuous and easily understood link’ to the requisite information. There is no public repository of disclosures made by businesses; however, to date 1227 statements have been made by 1292 companies. Examples of disclosures made by businesses can be found here and here. In the event of non-compliance with the Californian Act the Attorney General can file a civil action for injunctive relief. However, to date the Attorney General has not taken such action calling into question the efficacy of the Californian Act.

Hong Kong

Earlier this year, members of the Hong Kong Legislative Council introduced a draft Modern Slavery Bill 2017 (HK) (the HK Bill) that is based on the UK Modern Slavery Act. If passed into law, the HK Bill will require companies exceeding a specific threshold amount to prepare and submit an annual Modern Slavery Statement. It also provides claimants will a civil cause of action against companies that have committed an offence under the HK Bill or knowingly benefited, financially or by receiving anything of value from participation in a venture which that company knew or should have known has engaged in an act in violation of the HK Bill. Accordingly, it is the first modern slavery bill to give claimants a cause of action to sue companies. However, there is no timeline for the HK Bill to come into force and it is yet to be seen as to whether it will receive support from the government.

Brazil 

In 2004 Brazil introduced a ‘name-and-shame strategy’ in order to combat slavery by employers (both businesses and people). In order for a business to be placed on the list, the following process must be adhered to:

1. A complaint must be submitted to the government or a civil society organisation.
2. A labour investigation group investigates the complaint.
3. If the labour inspectors find that the relevant business has subjected its workers to ‘slave-like conditions’, charges will be laid against the business and sent to the Ministry of Labour and Employment.
4. The business may be required to pay a fine.
5. If the business is found guilty of exploiting its workers, its name will be put on the ‘dirty list’.
6. The business will then be monitored for the subsequent two years after which its name will be removed from the list if all fines are paid and it does not subject its workers to slavery.

Since 2004 more than 300 businesses have been placed on the list, which has affected those businesses’ ability to obtain financing and has resulted in boycotting by the business community and consumers.

Canada

On 13 December 2018 a bill was introduced into the House of Commons of Canada titled ‘C-423 – An Act respecting the fight against certain forms of modern slavery through the imposition of certain measures and amending the Customs Tariff’ (the Canadian Bill). The stated purpose of the Canadian Bill is to:

implement Canada’s international commitment to contribute to the fight against modern slavery through the imposition of reporting obligations on entities involved in the manufacture, production, growing, extraction or processing of goods in Canada or elsewhere or in the importation of goods manu­factured, produced, grown, extracted or processed outside Canada (emphasis added).

An ‘entity’ is defined as a corporation or a trust, partnership or other unincorporated organisation that:

• is listed on a stock exchange in Canada;
• has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years:
• it has at least $20 million in assets,
• it has generated at least $40 million in revenue,
• it employs an average of at least 250 employees.

If the Bill passes the Canadian Parliament, such entities will be required to provide the Minister with an annual modern slavery report that demonstrates:

• the steps the entity has taken during the previous year to prevent and reduce the risk that forced labour[2] or child labour[3] is used at any step of the manufacture, production, growing, extraction or processing of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity.

Other information that must be included in the report includes:

• the entity’s structure and the goods that it manufactures, produces, grows, extracts or processes in Canada or elsewhere or that it imports into Canada;
• the entity’s policies in relation to forced labour and child labour;
• the entity’s activities that carry a risk of forced labour or child labour being used and the steps it has taken to assess and manage that risk;
• any measures taken to remediate any forced labour or child labour; and
• the training provided to employees on forced labour and child labour.

In this respect the reporting criteria bear resemblance to the mandatory reporting criteria contained in the Australian Modern Slavery Act (read more here). The report must include an attestation made by a director (or officer) of the entity that the information in the report is ‘true, accurate and complete’ and must be available to the public, including by posting it in a ‘prominent place’ of the entity’s website.

If the Minister is of the opinion that an entity has not complied with the requirements set out above, it may order that the entity ‘take measures that he or she considers to be necessary to ensure compliance’ and the entity may be liable of an offence punishable on summary conviction and liable to a fine of up to $250,000. Accordingly, the Canadian Bill in its current form has more bite that both the UK and Australian Modern Slavery Acts.

Conclusion 

The modern slavery developments discussed above show evidence of the global movement towards combatting modern slavery in global supply chains and increasing transparency by businesses in that respect. It demonstrates that governments worldwide are taking the implementation of the UN Guiding Principles on Business and Human Rights seriously and taking steps to ensure that corporates (including the entities which they control) respect human rights in their operations and activities. It is extremely likely that we will continue to see more countries joining in the fight against modern slavery by implementing legislation to regulate corporate supply chains and operations.

[1] Doing business in California is defined as “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.”

[2] ‘Forced labour’ means ‘labour or service provided, or offered to be provided, by a person under circumstances that could reasonably be expected to cause the person to believe that their safety or the safety of a person known to them would be threatened if they failed to provide, or offer to provide, the labour or service’: see section 2(1) of the Canadian Bill.

[3] ‘Child labour’ means ‘labour or service provided, or offered to be provided, in Canada by children under circumstances that are contrary to the laws applicable in Canada or provided or offered outside Canada under circumstances that, if provided or offered in Canada, would be contrary to the laws applicable in Canada’: see section 2(1) of the Canadian Bill.