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Speaker's Corner: Guiding principles a must-read

On a day-to-day basis, a typical corporate lawyer spends very little time thinking about human rights. This is not out of apathy or a lack of respect for the issues but rather a lack of knowledge and understanding of human rights issues and how they can intersect with one’s legal practice. While, domestically, certain human rights are regulated by strict laws, when clients have operations overseas, the rules and requirements become less clear.

The fact that many of the leading global human rights standards are currently only considered to be “soft law” further encourages the misconception that corporate lawyers can disregard human rights issues when giving legal advice.

This way of practice is slowly beginning to change as clients increasingly express the need for assistance in navigating complex and potentially costly human rights challenges within their business model. These challenges can range from issues as straightforward as a minor employment dispute to issues as complex as determining the extent of a client’s obligations when operating in a conflict zone.  

Human rights issues are also becoming more important in the context of transactions, as many companies are now requiring that extensive human rights due diligence takes place prior to an acquisition or merger. Failing to accurately identify human rights issues in a transaction can be costly, if not fatal, to a client.

Consequences of such a failure may include not only the steep cost of litigation but also the revocation of a permit or the loss of a company’s social licence to operate. The focus on human rights is also increasingly investor-driven, with many large investors demanding transparency and accountability with respect to human rights issues.

Although this shift may at first blush appear to be rooted in altruism, the reality is that investors are increasingly aware of the significant costs that accompany a failure to respect human rights.

For example, recent research on the costs of company-community conflict conducted by the Corporate Social Responsibility Initiative at the Harvard Kennedy School and the Centre for Social Responsibility in Mining at the Sustainable Minerals Institute at the University of Queensland showed that a major world-class mining project with capital expenditures of between US$3 billion and US$5 billion would suffer costs of roughly US$20 million per week of delayed production in net present-value terms in the event of a shutdown due to a labour dispute or community opposition.  

So, as human rights issues continue to permeate the legal sphere and demand for expertise grows, how should corporate lawyers prepare themselves to tackle this complex area, particularly when no clear legal framework exists?

Fortunately, while a clear legal framework may be lacking, there is a growing body of guidance that exists to set out the responsibilities of companies when it comes to respect for human rights — the most authoritative being the UN Guiding Principles on Business and Human Rights.

The guiding principles are a set of 31 principles drafted after years of extensive stakeholder consultations, which clarify the duties and responsibilities of states and corporations to protect and respect human rights in the context of business activities.

The principles are based on three pillars. These are the states’ obligations to protect human rights, corporations’ responsibilities to respect human rights and, lastly, access to effective remedies if human rights are not respected.

While the guiding principles do not impose new legal obligations on businesses, they serve as a tool to guide corporate practice and offer a framework upon which states can base their domestic legislation.    

The public and the private sector have embraced the principles as the leading guide in the area of business and human rights. They were endorsed by the American Bar Association in 2012 and the G-7 Leaders in 2015, and large companies such as the Coca-Cola Company and General Electric have come out in support of their implementation.

Interestingly, the Fédération Internationale de Football Association announced in 2015 that it will make it compulsory for both contractual partners and those within the supply chain to comply with the provisions set out in the Guiding Principles. Compliance with the guiding principles in a contractual context could include an obligation to identify the human rights risks arising from contracts and negotiating language into the contacts that properly incentivizes behaviour that respects human rights and disincentives behaviour that does not.

To assist lawyers in understanding their obligations under the Guiding Principles, the International Bar Association has released a practical guide on business and human rights. The guide details how the principles may be used when providing advice on corporate governance and enterprise risk management, reporting and disclosure, disputes, contracts and agreements and development of and participation in human rights standards. The work done by the International Bar Association to create such an in-depth guide speaks volumes as to the value these Guiding Principles can bring to a corporate lawyer’s practice.

While it’s easy to understand why corporate lawyers have thus far remained fairly reticent to fully engage in the human rights issues that arise within their practices, given the rise of global standards and guidance directed squarely at the legal practice, corporate lawyers are becoming better equipped to play a valuable and meaningful role in the protection and promotion of human rights. While the area’s mix of soft law and hard law combined with limited guidance and tough facts may make some lawyers’ stomachs turn, this complexity is precisely why it’s so important for lawyers to stay engaged in this area. My advice for today — read the guiding principles. Your clients will thank you for it.

Claire Lehan is a corporate lawyer with Bennett Jones LLP in Toronto.

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