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Opportunities for law firms to lead the way on human rights

Feature Articles

Cite as: Jan/Feb 2013 87 (1/2) LIJ, p.54

Increasing recognition of businesses' human rights responsibilities and the development of international guidelines in this area have important implications for law firms.

By Dora Banyasz, Susanna Kirpichnikov and Jonathan Kelp

In recent decades, there has been an increased focus on the intersection between business activity and human rights, prompted by the expansion of the private sector and an increase in transnational economic activity. However, there was no clear articulation of the way in which businesses, including law firms, could and should prevent human rights harms and mitigate human rights impacts until the development of the “Protect, Respect, Remedy” Framework in 2008 and the presentation to the UN Human Rights Council of the Guiding Principles on Business and Human Rights (the Guiding Principles) in 2011.

Issues associated with the human rights impacts of business activity and what they mean for law firms was identified by the Law Institute of Victoria’s Human Rights Committee as an important topic to highlight to the profession. This article explains the Guiding Principles, looks at other relevant human rights standards, and identifies why law firms may wish to assess their potential human rights impacts and the challenges they may face in doing so.

The Special Representative’s work on business and human rights

Framework

In 2005, Professor John Ruggie (the Special Representative) was appointed as the UN Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises. He was tasked with clarifying the roles and responsibilities of different actors in relation to business and human rights issues and in 2008 presented to the UN Human Rights Council a conceptual framework known as the “Protect, Respect, Remedy” Framework (the Framework).1 The Framework articulates the roles and responsibilities of state and business actors and identifies challenges with respect to business-related human rights impacts. It is composed of three complementary pillars:

1. the state duty to protect against human rights abuses by third parties, including business;

2. the corporate responsibility to respect human rights; and

3. greater access by victims to effective remedies, both judicial and non-judicial.

The Framework was unanimously endorsed by the UN Human Rights Council.2

The state duty to protect against human rights abuses by non-state actors in their territory or jurisdiction derives from international law. States clearly have a discretion in determining how to afford such protection, but the Framework contemplates protection through policies, regulation and adjudication.

The corporate responsibility to respect human rights does not impose binding obligations on corporations. Rather, it means that companies need to undertake human rights due diligence to avoid infringing human rights and to address adverse impacts when they do occur. Importantly, this “do no harm” standard applies across all of a company’s business activities, including its relationships with third parties.

The third pillar of the Framework recognises that, even with the best of intentions, things do go wrong. While the other components of the Framework seek to prevent harm, the third pillar highlights the importance of effective redress and grievance mechanisms when human rights breaches have occurred.

Guiding Principles

Subsequently, the Special Representative developed the Guiding Principles to support the operationalisation of the Framework.3

This “how to” guide was endorsed by the Human Rights Council in July 2011. Together with the Framework, it represents an authoritative standard of expected conduct for both states and businesses.4 The Framework and Guiding Principles apply not only to multinational corporations but also to businesses of all sizes and in all sectors, including law firms. The work of the Special Representative has drawn together existing hard and soft law as well as other standards that apply to business-related human rights impacts to establish an anchor for discussions and a catalyst for progress in this area.

Other human rights standards

The ideas underpinning the Guiding Principles are not new. Thousands of businesses worldwide (including law firms) have already signed up to a number of voluntary membership initiatives that seek to align business operations and strategies with universally accepted principles in the areas of human rights, labour, environment and anti-corruption.

One example is the UN Global Compact, which was launched in 2000 to promote and encourage commitment to its ten principles (which include two human rights principles). It has more than 7700 corporate participants and stakeholders from over 130 countries, including Australia, and has developed tools for businesses such as the Global Compact Self Assessment Tool. Global Compact local networks have also developed relevant tools and resources, such as the Global Compact Network Netherlands’ How To Do Business with Respect for Human Rights: A Guidance Tool for Companies.5

The Equator Principles (EPs), a financial industry benchmark for identifying, assessing and managing environmental and social risk in project finance transactions, are another example. The financial institutions that have signed up to the EPs have committed to not providing loans to projects where the borrower will not or is unable to comply with the social and environmental standards that inform the EPs.6

There are also a number of resources available outside membership initiatives to assist businesses to understand how to respect human rights. Over more than a decade, the Global Reporting Initiative has developed a framework for sustainability reporting that is intended to be a generally accepted framework (including performance indicators) for reporting on an organisation’s economic, environmental and social performance.7 The Business Leaders Initiative on Human Rights, the UN Global Compact and the Office of the UN High Commissioner for Human Rights have produced a Guide for Integrating Human Rights into Business Management, which is an online tool that sets out the basic expectations of businesses when it comes to human rights.8 The Monash University Castan Centre for Human Rights Law, the International Business Leaders Forum and the Office of the United Nations High Commissioner for Human Rights have produced a business reference guide entitled Human Rights Translated and the Danish Institute for Human Rights has developed and maintains the widely used Human Rights Compliance Assessment tool.9

Implementation of the Special Representative’s work

The impact of the Special Representative’s work can be seen already. The Framework and Guiding Principles have been integrated into various international standards and frameworks and the European Union is using them as a basis for the development of guidance notes for businesses in different industry sectors.10 They are influential in how global corporations are conducting their operations and thinking about due diligence and they are informing the development of domestic policies and standards.

An example of the integration of the Guiding Principles into international standards is the recent update of the OECD Guidelines for Multinational Enterprises, which now provide that businesses must have in place appropriate due diligence processes to ensure respect for human rights, and cover issues such as paying decent wages, combating bribe solicitation and extortion and promoting sustainable consumption.11 The IFC Performance Standards were also recently reviewed to better align with the Guiding Principles.

It is critical that all businesses have human rights issues on their radar and consider their human rights impact. While businesses have begun implementing the Guiding Principles and many have turned to lawyers for advice in doing so, it appears that fewer law firms have considered the application of human rights principles to their own business practices. A review of the 100 largest law firms in the world by A4ID (Advocates for International Development) found that none appeared to have published a high-level policy statement committing to respect human rights, that a small number had signed up to the UN Global Compact and that only one had published its policy regarding client selection and supply chains.12 The Guiding Principles may not be legally binding, but they do represent the minimum expected standard for all business enterprises, and the responsibility to respect human rights applies as much to law firms as it does to any other business.

The relevant principles for law firms

The key Guiding Principles that are relevant to law firms feature in the second pillar of the Framework. The key foundational principle is that businesses should respect human rights by avoiding infringing, both directly and indirectly, the internationally recognised human rights of others and by addressing any adverse human rights impacts with which they are involved.

Principle 13 sets out what the corporate responsibility to respect requires in a nutshell:

(a) avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts where they occur; and

(b) seek to prevent or mitigate adverse human rights impacts directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.13

This corporate responsibility to respect is to be achieved through the operational principles articulated in the Guiding Principles. These encourage companies to make policy commitments, undertake due diligence (to identify, prevent, mitigate and account for how they address human rights impacts), and create or contribute to processes to remedy any adverse human rights impacts.14

Opportunities for law firms

Early adoption of the Guiding Principles presents a distinct opportunity for law firms. Taking this step enables a firm to promote not just its credentials in the area of business and human rights and its experience in advising clients on their obligations, but also the fact that it “walks the walk” by addressing its own responsibilities. A commitment to the protection of human rights will likely have reputational benefits that flow into attracting new clients and top recruits. Further, by aligning its operations with the Guiding Principles, a law firm will be better placed to manage its own legal and business risks.

As more businesses turn to analysing their own supply chains as part of a move towards adopting the Guiding Principles (often on the advice of their lawyers), law firms will increasingly be asked by clients to demonstrate their firms’ human rights policies and commitments as part of their clients’ business supply chains. The UN Global Compact Network Australia human rights leadership group for business and the online forum Lawyers for Better Business are two places where law firms can begin engaging with these issues.

Challenges for law firms15

As with all businesses, there is no doubt that law firms will face a range of challenges in seeking to implement the Guiding Principles, including in relation to supply chains and clients.

Supply chains

Law firms typically have complicated and extensive supply chains, entering into contracts with other companies for activities as diverse as catering, cleaning, travel, document production, technology procurement and recruitment. The due diligence requirement could lead to law firms incorporating relevant standards and expectations into their contracts with all such suppliers.

When assessing supply chain human rights impacts, principle 19 requires that, in determining the appropriate action to take in preventing and/or mitigating any adverse human rights impacts, a business should consider:

(a) whether it caused or contributed to any human rights impact, or whether the business is involved in the impact because it is directly linked to the business’s operations, products or services by a business relationship; and

(b) the extent of its leverage in addressing the adverse impact.16

If a business directly caused or contributed to the impact, then the business should change or cease the relevant activity, or prevent its contribution to the activity.17 If an issue arises through the actions of another entity in the business’s supply chain, the Guiding Principles recognise that the situation is more complex, and varying degrees of action (including remediation) may be possible or appropriate in any given case.

Factors that will dictate the appropriate level of action include the extent of the leverage the business has over the entity causing the human rights impact, and factors regarding the relationship itself, such as the effect of terminating any relationship with the entity. For law firms, terminating a supply chain relationship may have an adverse impact on third parties and clients of the firm, and this would be an important factor in determining the appropriate course of action.

Principles 20 and 21 require internal monitoring and external communication of the effectiveness of any response to a human rights impact arising in the supply chain.18 The nature of the external communication that would be appropriate in any given case is again related to the nature of the business’s operations and the context in which it operates. The type and recipients of any such communication would likely to be different for a law firm than for an ASX-listed company with ongoing disclosure obligations.

Clients

Through a general international business and human rights lens, law firms may be (or may be perceived to be) associated with or complicit in the adverse human rights impacts caused or contributed to by their clients. The Guiding Principles specifically refer to complicity in human rights impacts and confirm that complicity has both legal and non-legal meanings. In particular, the Guiding Principles state that “business enterprises may be perceived as being ‘complicit’ in the acts of another party where, for example, they are seen to benefit from an abuse committed by that party”.19

Principles 17 to 19 of the Guiding Principles contemplate businesses understanding the nature of any human rights impacts with which they are involved.20 For a law firm, this likely means investigating any human rights issues that may arise before commencing to act for a client (where no pre-existing relationship exists). Where potential human rights impacts become known in the course of acting for a client, law firms may be expected to identify and advise the client on the human rights issues that have arisen.21 The extent to which further steps can or should be taken may require careful consideration of the interaction between the Guiding Principles and any relevant professional conduct codes applying to the firm and its lawyers. Ultimately, it may be appropriate for a firm to consider whether to continue acting for a client that, having been advised on human rights impacts, seeks to engage (or continue to engage) in conduct likely to have a significant adverse human rights impact. Relevantly, A4ID is currently preparing a report on the compatibility of the Guiding Principles with professional codes of conduct in a number of jurisdictions, including Australia, and on how firms can manage these complicated client relationship issues.

Finally, the extent to which a law firm can publicly demonstrate, as part of the steps it has taken to redress or reduce any adverse human rights impacts with which it is involved, that it has advised a client on human rights impacts is likely to be very limited due to confidentiality and legal professional privilege considerations. Principle 21(c) recognises this practical limitation by providing that any external communication must not pose risks to legitimate requirements of commercial confidentiality or to affected stakeholders or personnel.

Conclusion

It is clear that, as a result of the Special Representative’s work, the recognition of business-related human rights issues is here to stay. As the move towards adoption and implementation of the Guiding Principles gathers pace across business, now is the time for law firms to harness that momentum and develop strategies to ensure that they are at the forefront of respecting human rights.



DORA BANYASZ, SUSANNA KIRPICHNIKOV and JONATHAN KELP are members of the LIV’s Human Rights Committee. Dora Banyasz is a lawyer in the Commercial Litigation & Dispute Resolution group at Allens. Susanna Kirpirchnikov is a lawyer at Lander & Rogers. Jonathan Kelp is a solicitor based in Melbourne.

1. Human Rights Council, eighth session, Protect, Respect and Remedy: A Framework for Business and Human Rights, report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie, 7 April 2008, A/HRC/8.5.

2. Professor John Ruggie, UN Special Representative on the issue of human rights and transnational corporations and other business enterprises, The UN “Protect, Respect, Remedy” Framework for Business and Human Rights, September 2010, available at www.reports-and-materials.org/Ruggie-protect-respect-remedy-framework.pdf.

3. Human Rights Council, seventeenth session, Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect, Remedy” Framework, report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie, 21 March 2011, A/HRC/17/31.

4. Human Rights Council resolution A/HRC/RES/17/4, 6 July 2011.

5. St James Ethics Centre, UN Global Compact, http://thehub.ethics.org.au/ungc at 28 June 2012; The Global Compact, Global Compact Self Assessment Tool, www.globalcompactselfassessment.org/humanrights at 27 August 2012; Global Compact Network Netherlands, How To Do Business with Respect for Human Rights: A Guidance Tool for Companies (2010), www.unglobalcompact.org/docs/issues_doc/human_rights/Resources/how_to_business_with_respect_for_human_rights_gcn_netherlands_june2010.pdf at 27 August 2012.

6. Equator Principles, About the Equator Principles (2011), www.equator-principles.com/index.php/about-ep at 27 August 2012.

7. Global Reporting Initiative, What Is GRI?, https://www.globalreporting.org/information/about-gri/what-is-GRI/Pages/default.aspx at 24 July 2012.

8. BLIHR Ltd, Guide for Integrating Human Rights into Business Management (2012), www.integrating-humanrights.org at 28 June 2012.

9. See http://human-rights.unglobalcompact.org/doc/human_rights_translated.pdf and www.humanrightsbusiness.org.

10. This EU project is being carried out by Shift (www.shiftproject.org) and the Institute for Human Rights and Business (www.ihrb.org).

11. OECD, “New OECD guidelines to protect human rights and social development”, press release, 25 May 2011.

12. A4ID, “Law firms’ implementation of the guiding principles on business and human rights: discussion paper” (2011), http://a4id.org/resource/report/guidingprinciples.

13. Principle 13, Guiding Principles, note 3 above.

14. Principles 16–24, Guiding Principles, note 3 above.

15. The authors acknowledge that this section of the article draws on the work of A4ID on law firms’ implementation of the Guiding Principles.

16. Principle 19, Guiding Principles, note 3 above.

17. Commentary to principle 19, Guiding Principles, note 3 above.

18. Principles 20 and 21, Guiding Principles, note 3 above.

19. Principle 17, Guiding Principles, note 3 above.

20. Principles 17–19, Guiding Principles, note 3 above.

21. A4ID discussion paper, note 12 above.

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