This series builds on some ideas I have been working through for a number of years relating to a fundamental shift in the approaches to corporate governance that broaden the ambit of corporate governance issues from a singular focus on internal governance (the relationships among officers, shareholders and directors) to one that includes corporate behavior and the standards by which officers, directors and shareholders exercise their respective governance authority. This shift also changes the scope of what is understood as "law" to be applied to issues of corporate governance, from one principally focused on national law to governance norms that may be sourced in the declarations and other governance interventions of public and private international bodies. Lastly, it appears to point to an evolution to the role of the state from the principal source of standards and enforcer of law to a vehicle for the implementation of international standards in which enforcement power is left to global market actors--principally consumers and investors function of the decisions of global actors. All of this is inconsistent with traditional notions of the role of law, the scope of corporate governance and the nature of corporate social responsibility int he United States. The extent to which the United States participates in the construction of these autonomous international systems may suggest the direction in which government policy may be moving away from the traditional consensus of corporate responsibility to something perhaps entirely new.
This post focuses on the human rights specific provisions of the Guidelines for Multinational Enterprises (2011) (MNE Guidelines) of the Organization for Economic Cooperation and Development, focusing on its incorporation of the U.N. Guiding Principles on Business and Human Rights. Subsequent posts will consider the MNE Guidelines' remedial architecture. That background will provide the foundation for a review of the way in which the U.S. National Contact Point has functioned within this system.
Chapter 6 of the MNE Guidelines incorporates the framework of the UN Guiding Principles on Business and Human Rights, grounded in the three pillar Protect-Respect-Remedy framework developed by John Ruggie as UN Special Representative on Business and Human Rights between 2006 and 2011. See Larry Catá Backer, "The United Nations’ “Protect, Respect, and Remedy” Human Rights Project: On Operationalizing a Global Framework for the Regulation of Transnational Corporations," Santa Clara J. Int’l Law 9:37 (2011). The Chapeau of MNE Guidelines Chapter 6 succinctly transposes the three pillar framework into the structures of the Guidelines:
States have the duty to protect human rights. Enterprises should, within the framework of internationally recognised human rights, the international human rights obligations of the countries in which they operate as well as relevant domestic laws and regulations. (MNE Guidelines Chp 6).
The UN’s “Protect, Respect and Remedy” project has discussed the importance of soft law instruments. John Ruggie has suggested that “The Guiding Principles’ normative contribution lies not in the creation of new international law obligations but in elaborating the implications of existing standards.” (A/HRC/17/31). In regards to business enterprises, Ruggie further expresses: “For business enterprises, the Guiding Principles outline a human rights due diligence process. This entails assessing actual and potential human rights impacts; integrating and acting upon the findings; tracking the effectiveness of responses; and communicating how impacts are addressed. Human rights due diligence is meant to include dealings with third parties linked to the business enterprise.”
The UN represents the first internationally recognized standard for business and human rights. Development by the United Nations, its aims are to create a new global framework grounded in the normative expectations of responsibility business actives by global economic actors.
On June 18, 2008, after 6 years of research with civil society members, governments, academics, and lawyers and so on, the SRSG introduced his “Protect, Respect and Remedy” framework to the Council and the Human Rights Council, which welcomed it. The “Protect, Respect and Remedy” framework, rests on three pillars: the states duty to protect human rights, the corporate responsibility to respect human rights and access to remedy for individuals adversely affected by abuses by private enterprises. (Business & Human Rights Resource Centre, The UN "Protect, Respect and Remedy" Framework for Business and Human Rights). This, for the first time, “established a global standard for preventing adverse impacts on human rights within the context of transnational enterprise.” (Guiding Principles Endorsed). These Guiding Principles acted “as the authoritative global reference point for business and human rights… [And]… will also provide civil society, investors and others the tools to measure real progress in the daily lives of people.” (Ibid.).
- Works with the UN Working Group on business and human rights, that was established upon UN Human Rights Council endorsement of the Guiding Principles;
- Funds programs that foster implementation of the Guiding Principles through the Bureau of Democracy, Human Rights, and Labor’s Human Rights and Democracy Fund;
- Facilitates conversation with businesses, civil society, and governments about implementation of the Guiding Principles; and
- Advocates for integration of the Guiding Principles into existing guidelines and performance management efforts.
The Guiding Principles are a series of principles produced and released by Ruggie and his team in an attempts to “operationalize” the three pillar framework. These provide an overview on what States and corporations are expected to do. They also released an interpretive guide to further contextualize these principles and methods on ways corporations can “operationalize” these principles within their day to day operations. ("Business & Human Rights Resource Centre: Home." Business & Human Rights : Home. Web. 22 Apr. 2012). These Guiding Principles do not entail any new forms of hard law, or any new judicial mechanisms beyond what states can currently do within their reach. It does, on the other hand, provide a new reference point for civil society actors and the general stakeholders to use in light of corporate abuses. It provides an international standards and a way to harmonize this standards through multiple regimes.
The State Duty to Protect. The principle legal obligation is borne by states, who are burdened with a duty to protect human rights. While the scope of that duty is expressed broadly to include all relevant human rights instruments developed at the international sphere, the Guidelines are also careful to suggest that the legal obligations of states may be constrained by the limits of their legal obligations. This, as a technical matter, states that have refused to accede to international instruments may not be bound by them as part of their duty to protect human rights, and their obligations to protect human rights in non-binding international instruments is ambiguous at best. But states also have a broader policy based duty to adjust their behavior in light of relevant international instruments, and an obligations tot seek regulatory coherence sensitive to their human rights obligations. While states are not responsible for human rights abuse by private actors, they may be in breach of their international human rights law obligations when they fail to take proper steps to prevent or punish abuses by the private sector. Under current law, states are not required to regulate the extraterritorial activities of businesses residing in their jurisdiction, however, the UNGP encourage states to set clear expectations that businesses respect human rights abroad. The UNGP also note that the state should take additional care in monitoring and preventing human rights abuses by business enterprises owned, controlled, or supported by the state.
The corporate responsibility to respect human rights is the most innovative feature of the Guiding Principles. Thsi responsibility exists independent of the state duty to protect human rights and are most closely tied to international human rights instruments, irrespective of their precise legal status within the domestic legal order of any state. The centerprise of this responsibility is structured around human rights due diligence--a set of obligations relating to corporate activity to incorporate a sensitivity to adverse human rights impacts of their activities. In conducting due diligence, the UNGP encourage companies to formally assess actual and potential human rights impacts, to create a statement of commitment to respecting rights, and to integrate human rights across relevant internal functions and processes.
The third pillar principles center on access to remedies. The focus of the remedial provisions is on the judicial apparatus of states. States are required to have judicial structures in place, as well as to develop appropriate non judicial remedies. Corporations are responsible to preventing and remediating infringements of applicable human rights All non-judicial mechanisms, whether state-based or independent, should be legitimate, accessible, predictable, rights-compatible, equitable, and transparent. Similarly, Company-level mechanisms are encouraged to operate through dialogue and engagement, rather than with the company acting as the adjudicator of its own actions.
The role of corporate responsibility within this framework should not be underestimated. Though the focus appears to be on the legal duties of states, the most functionally important feature of the Guiding Principles is the focus on governance structures for corporate responsibility, setting behavior standards (the International Bill of Human Rights and foundational ILO Conventions), specifying legitimate procedures for ensuring implementation (human rights due diligence) and remediation obligations, all of which are independent of the state duty, though undertaken in deep collaboration with the state duty. Though both corporate responsibility and state duty are meant to operate in parallel, they need not. Corporations may not hide behind state failures to avoid their own obligations. Corporations are considered “specialized economic organs, not democratic public interest institutions. As such, their responsibilities cannot and should not simply mirror states’ duties…” ("Six Questions for John Ruggie: Where Is the Business and Human Rights Agenda Going?" ENews Builder | Email Marketing and HTML Email Newsletters, Create, Send and Track. Apr. 2008. Web. 21 Jan. 2012). Corporations, in this context, are “specialized economic organs, not democratic public interest institutions. As such, their responsibilities cannot and should not simply mirror states’ duties…,” according to then SRSG John Ruggie... (Ibid.). Their responsibility would then be to comply with international and domestic legal standards and laws, and to respect human rights throughout their entire operations, regardless of relationships.
And this represents all aspects of its business relations. Whether it is a business partners, value chains, non-state actors, or state controlled institutions, they must respect human rights through all business relations. Corporations may go beyond the responsibility to respect human rights, but are not expected too under this pillar. As a consequence, the three pillar framework framework tries to create a “harmonizing” relationship with business and human rights with the goals of creating a new social normative framework to shape the behavior of private entities. (Larry Catá Backer, "From Moral Obligation to International Law: Disclosure Systems, Markets and the Regulation of Multinational Corporations," 39 Georgetown Journal of International Law 591 (2008)) This relies on the premise that soft law can “provide incentives for the management of a values -- based behavior structure.” (Ibid). This is being done by producing a regulatory apparatus (Gunther Teubner, “The Corporate Codes of Multinationals: Company Constitutions beyond Corporate Governance and Co-determination”, in: Rainer Nickel (ed), Conflict of Laws and Laws of Conflict in Europe and Beyond: Patterns of Supranational and Transnational Juridification, (Antwerp, Intersentia, 2010)). This regulatory apparatus operates within the context of the existing legal architecture as a way to influence transnational actors to work toward socially acceptable behavior by reducing corruption and human rights violations, particularly in countries with weak regulatory infrastructure. As John Ruggie has reiterated: “The Guiding Principles’ normative contribution lies not in the creation of new international law obligations but in elaborating the implications of existing standards and practices for States and businesses; integrating them within a single, logically coherent and comprehensive template; and identifying where the current regime falls short and how it should be improved. They do so under each of the Framework’s three pillars: Protect Respect and Remedy.” A/HRC/17/31. In regards to business enterprises, Ruggie further expresses: “For business enterprises, the Guiding Principles outline a human rights due diligence process. This entails assessing actual and potential human rights impacts; integrating and acting upon the findings; tracking the effectiveness of responses; and communicating how impacts are addressed. Human rights due diligence is meant to include dealings with third parties linked to the business enterprise.”
The Guiding Principles in the MNE Guidelines:
The Commentary to MNE Guidelines chapter 6 explains the close connection between the substantive provisions of the MNE Guidelines with respect to human rights and the Guiding Principles on Human Rights:
This chapter opens with a chapeau that sets out the framework for the specific recommendations concerning enterprises’ respect for human rights. It draws upon the United Nations Framework for Business and Human Rights ‘Protect, Respect and Remedy’ and is in line with the Guiding Principles for its Implementation. (MNE Guidelines Chp 6 Commentary Para 36).
In all cases and irrespective of the country or specific context of enterprises’ operations, reference should be made at a minimum to the internationally recognised human rights expressed in the International Bill of Human Rights, consisting of the Universal Declaration of Human Rights and the main instruments through which it has been codified: the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights, and to the principles concerning fundamental rights set out in the 1998 International Labour Organisation Declaration on Fundamental Principles and Rights at Work. (MNE Guidelines Chp 6 Commentary Para 39).
The MNE Principles need not have transposed the substantive provisions of the Guiding Principles' corporate responsibility to respect human rights. Yet it was understood by the OECD that this transposition did more than merely coordinate two approaches to the framing of rules for business conduct that touches on human rights concerns. It creates something more tangible and something that begins to take on the feel of rules with effect beyond and autonomous of the national laws of even OECD adhering startes:
both the unanimous endorsement by the United Nations Human Rights Council of a new set of Guiding Principles for Business and Human Rights developed by Professor John Ruggie and the update of the International Finance Corporation's Sustainability Framework, show a new global agenda for corporate responsibility based on the broadly shared view that corporate responsibility is no longer a matter of voluntary goodwill, but at the very least, a duty not to cause harm or actively contribute to economic, environmental and social progress of host economies. This duty exists independently of what governments and/or private stakeholders do. The Guidelines, as the most comprehensive voluntary code of conduct developed by governments in existence today, are uniquely positioned to further this global agenda. The 2011 Update of the Guidelines could not have been timelier. (OECD, OECD Guidelines for Multinational Enterprises, REPORT BY THE CHAIR OF THE 2011 MEETING OF THE NATIONAL CONTACT POINTS; p. 2)