Around the globe: Business Human Rights update

Americas

The US and Canada remain a region in search of a concrete legal framework on business and human rights, with Canada and California leading the way.

In the US, the fate of the Senate could mean the difference between a federal human trafficking disclosure law for corporations and the status quo, which as of right now consists largely of unenforced mandates—the conflict minerals provision of the Dodd-Frank Act and the California Transparency in Supply Chains Act. But despite this absence of “hard law” in the U.S., investor and customer focus on human trafficking and CSR continue to drive businesses to create, grow, and improve social compliance policies and procedures, sustainability plans, and transparency.

Canada may yet lead the way, however, as human trafficking legislation appears to be on the horizon, and several important court decisions are shaping the human rights landscape.  Pending legislation that mirrors existing disclosure laws in the United Kingdom and Australia has significant legislative support relative to prior failed bills. This legislation would authorize significant fines for non-compliance and bar entry into Canada of any goods manufactured with forced or child labor. Recent case law also provides new access to the courts for international human rights torts claims, as numerous decisions show a general trend towards both retaining jurisdiction and finding the potential for tortious breaches of international law.

While not yet fully mature, the legal and regulatory climates in the U.S. and Canada mean that consideration of human rights norms is becoming an essential part of legal and business planning.

There have been fewer business and human right related legal developments in South America during the course of 2020, though a number of countries continue to actively develop National Action Plans (NAPs) on implementing the UN Guiding Principles on Business and Human Rights, including Ecuador, Argentina and Peru. Colombia and Chile, the only countries in South America to have published NAPs to date, have also announced that they are working on updated versions. At the regional level, the Escazú Agreement has now been ratified by eleven countries, and will enter into force in early 2021. The treaty will increase access to public information on environmental matters, and it also contains provisions on the protection of human rights defenders.

Asia Pacific

Asia Pacific’s response to managing human rights risks is far from homogenous. It is home to some of the most onerous reporting obligations globally (Australia), as well as many of the nations identified as being at extreme high risk for modern slavery. Coronavirus has increased the risk to workers in Asia’s manufacturing industry, particularly as countries try to manage the economic impact of the pandemic, which has resulted in reduced demand, a movement towards a gig ecomony, and workers becoming increasingly desperate for work. Coronavirus has also limited the ability of larger customers to carry out in-person audits of their suppliers, which reduces worker protection.

As larger entities carrying on business in Australia continue to develop their anti-slavery programs, they are seeking information from suppliers in their region, and globally, in relation to how this risk is managed. Many are introducing procurement processes that take modern slavery risk into account when selecting vendors, and require human rights or modern slavery commitments from suppliers.  The first set of Australian reports has now been published by the Australian Border Force. Australia is still developing its National Action Plan on Business and Human Rights.

In October 2020, the Japanese government established an Inter-Ministerial Committee for their National Action Plan (NAP) on Business and Human Rights. Japan’s NAP was modelled off of the United Nations’ Guiding Principles on Business and Human Rights (UNGPs). Japan also established a NAP Working Group to facilitate discussion between the relevant government ministries and agencies and the Japanese business section, trade unions and civil society organisations. Global brands headquartered in Japan are increasingly adopting human rights policies and rolling them out throughout their operations.

Later in October 2019, the Royal Thai Government (RTG) adopted their First National Action Plan on Business and Human Rights (NAP). As a part of the drafting process, the RTG invited the UN Working Group on Business and Human Rights to an official visit of the country in the hope that the Group would provide recommendations for improvement. After their visit, the Working Group reported various issues of concern in respect of human rights abuses in the Thai business sector. There is growing awareness and interest about the importance of human rights and responsibilities in the workforce in Thailand. This is particularly so amongst larger Thai companies with exposure to global markets. There is an increasing dialogue emerging amongst business representatives concerning how to improve the transparency, assessment, reporting and monitoring of human rights abuses. For example, Thailand’s Securities and Exchange Commission (SEC) has advocated for the better protection of human rights in order for Thai companies to remain competitive, gain better business results, respond to Thailand’s structural problems and support the achievement of the Sustainable Development Goals.

Singapore has laws that criminalise human trafficking, but does not currently propose to adopt mandatory reporting. Since 2016, all companies listed on the Singapore Exchange (SGX) must prepare a sustainability report on a “comply or explain” basis, which includes, among others, material environmental, social and governance (ESG) factors that affect the issuer’s performance and prospects, and a minimal description of how issuers manage the material factors identified.

In Hong Kong, the Crimes (Amendment) (Modern Slavery) Bill 2019 was unsuccessful due to the failure to obtain support from the Hong Kong Government. The Business and Human Rights Network Hong Kong, a network of civil society organisations and individuals, remains committed to promoting awareness of and respect for human rights in business operations in Hong Kong. 

Europe

The legal framework on business and human rights in Europe has evolved significantly in recent years. The region leads the way in terms of existing and emerging legislation on human rights due diligence, as well as reporting obligations which extend to the full range of internationally respected human rights. Further key legal developments are expected in 2021. We set out below a summary of notable consultations and legislative reviews at the EU level, before turning to key national developments in a number of European jurisdictions.

2021 is likely to see the EU take decisive steps towards significant reform in terms of corporate human rights obligations. Most notably, as we have previously reported, the European Commission (Commission) is expected to promulgate legislation mandating human rights and environmental due diligence in 2021. This follows announcements by the European Commissioner for Justice, Didier Reynders, first in April 2020 and then again in October, that such legislation will be developed by early next year. Following a public consultation which is due to close on 8 February, this new legislation should be presented during the second semester of 2021. Based on Commissioner Reynders’ comments to date, the law is likely to be cross-sectoral and could provide for both civil and criminal liability.

In the meantime, in September 2020, the Committee on Legal Affairs of the European Parliament (JURI) published a draft report recommending that the Commission develop legislation on corporate due diligence and corporate accountability “without undue delay”. The draft report includes a comprehensive proposal of a directive which would require businesses to conduct human rights and environmental due diligence in their operations and value chains. The proposal, which will be voted on in January and tabled to the plenary of the European Parliament, may serve as a blue print for the legislation to be put forward by the Commission. Interestingly, the JURI proposal anticipates that the law would apply to businesses established outside the EU which sell goods or services in the internal market.

In addition, in December 2020, the Council asked the Commission to launch an EU Action Plan focusing on shaping global supply chains sustainably, promoting human rights, social and environmental due diligence standards and transparency by 2021. The Council also called on Member States to step up their efforts to effectively implement the UN Guiding Principles on Business and Human Rights, including through new or updated National Action Plans containing a mix of voluntary and mandatory measures.

As for reporting obligations, the Commission is in the process of revising directive 2014/95/EU of 22 October 2014 on non-financial reporting by large companies. This directive currently requires companies to publish a non-financial statement addressing the impact of their activities with respect to environmental, social, human rights and anti-corruption issues. In doing so, the Commission aims to increase access to information for civil society and investors while encouraging companies to develop a more responsible approach to business. 

Finally, as part of the EU objective to become the first climate-neutral continent by 2050, the EU has adopted the Taxonomy Regulation 2020/852 of 18 June 2020 that will allow for an EU-wide classification system for environmentally sustainable economic activities. The EU Taxonomy is one of the most significant developments in sustainable finance and will have wide ranging implications for Member States, companies, investors and issuers working in the EU and beyond. Relevant market actors would have to start complying with these requirements from December 2021, and the first set of so-called delegated acts will be released by the end of December 2020. ¹  Perhaps of most interest from a human rights perspective is the clarification in the Taxonomy Regulation that, in order to qualify as “environmentally sustainable”, economic activities need to comply with the minimum standards of the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights.²

At the national level, in France we observed developments in case law regarding the implementation of the French Law n° 2017-399, 27 March 2017, related to the duty of vigilance for parent and instructing companies (Duty of Vigilance Law). To date, seven formal notices have been submitted by NGOs, labor unions and local authorities urging the recipient companies to comply with the Duty of Vigilance Law. Of these notices, two were filed in 2020, and three have raised legal challenges in the courts.  Most recently, in October, NGOs seized the Judicial Court regarding the alleged inadequacy of Electricité de France’s vigilance plan regarding indigenous community consultations in connection with a wind farm project in Mexico. In 2021, we expect that further judicial decisions will help to provide clarity in terms of the courts’ approach to key concepts such as the requirement to ensure the “effective implementation” of vigilance plans.

In the Netherlands, 2020 began with the enactment of the Dutch Child Labour Due Diligence Act, which will require Dutch or foreign companies selling goods or services to Dutch end-users to conduct child labour focussed due diligence and to notify the appointed regulator that such due diligence has been exercised. The due diligence statements are published in a public online registry. Companies that have a reasonable suspicion that child labour may be involved in the provision of their goods or services will be required to develop and implement action plans to address such child labour risks. Non-compliance with any of these requirements may lead to fines, and repeated infringement could potentially lead to imprisonment for the responsible director. The law is expected to take effect on 1 January 2022.

In Germany, the Federal Ministry for Labour and Social Affairs and the Ministry for Economic Cooperation and Development released a discussion paper in June 2020 setting out the proposed parameters of a mandatory human rights due diligence law, which would apply to companies domiciled in Germany with 500 employees or more, though companies may be exempt if ‘major decisions’ are taken outside Germany. The proposal envisages due diligence requirements which draw from the UN Guiding Principles on Business and Human Rights, and companies would need to conduct risk analysis to identify and manage human rights issues in their businesses and value chains. The proposal suggests companies may be exempt from liability if their due diligence conforms to recognised industry standards, but it is unclear how this might work in practice, and the proposed law is very much subject to discussion.

In the UK, key developments in 2020 included the Government committing to amend the Modern Slavery Act 2015, including so that the six criteria to be addressed in companies’ annual statements will become mandatory. The Government also proposed mandatory due diligence legislation on specific issues (online harms and illegal deforestation) and continues to face calls to enact a broader mandatory human rights due diligence law following the Parliamentary Joint Committee on Human Rights’ recommendation in 2017. A number of group action claims against companies also progressed through the UK courts this year. Most notably, the Supreme Court heard arguments in Okpabi v Royal Dutch Shell Plc in June. The judgment, expected in early 2021, will further clarify the circumstances when a UK domiciled parent company may owe a duty of care towards claimants allegedly harmed by a subsidiary’s activities.

Elsewhere, there is a clear trend towards business and human rights related legislative proposals in other European countries. In Norway, the Business Minister recently announced that the government is working on a law against modern slavery using the UK Modern Slavery Act as a model. The Finnish government committed to a mandatory human rights due diligence law in 2019, while in 2020 a draft bill was submitted to the Austrian parliament regarding corporate social responsibility in the garment industry. In November 2020, a referendum in Switzerland resulted in the rejection of a popular initiative to introduce a binding human rights duty of care for all Swiss companies, though a majority of voters supported the law.³  A counter-project will nonetheless be implemented, providing for reporting obligations for certain companies in regard to human rights, environment, social issues and corruption (similar to the EU non-financial reporting directive referenced above) as well as a special duty of care with regard to minerals from conflict zones and child labour.

Middle East and Africa

To a significant degree, the business and human rights agenda in the Middle East in recent years has focussed on the construction industry and the rights of workers, particularly migrant labourers, working on large infrastructure projects. The award of the 2022 FIFA World Cup to Qatar resulted in greater international attention on the country’s labour laws and business recruitment practices, which has in turn served as a catalyst for legal reform. Most recently, in August and September 2020, Qatar enacted Law No. 17 of 2020 (which establishes a minimum wage of 1,000 Qatari riyals), Law No. 18 of 2020 (which clarifies when and how contracts of employment can be terminated), and Law No. 19 of 2020 (which will ensure that migrant workers can change employers without first having to obtain a ‘no objection certificate’). In December 2020, Oman’s Minister of Foreign Affairs confirmed the Sultanate also plans to abolish ‘no objection certificates’ in the near future – a sign of a broader trend in the Gulf. 

In the UAE, we see new legislation being introduced that focuses on developing personal liberties to attract overseas investment. This is particularly relevant given the fact expatriates constitute roughly 80% of the UAE’s population. However, this has yet to translate into requirements on businesses to make provision for human rights in the manner that can be seen in other countries.

In July 2019, Kenya became the first country in the African continent to publish a National Action Plan (NAP) on business and human rights, though NAPs are at various stages of development in other countries including Tanzania, Morocco, Uganda and Mozambique. Some of these states have published national baseline assessments (using the UN Guiding Principles on Business and Human Rights as the principal point of reference) as part of that process.

Though the South African Government has yet to develop its own NAP, we see mounting pressure on corporates in the country to consider business and human rights risks as a matter of best practice, even if there is no direct obligation on them to do so. Whilst the adoption of best practice is welcomed, it is expected that the South African Parliament will begin to be lobbied to enact legislation including mandatory supply chain reporting requirements for companies with high public interest.