With the French parliament’s unanimous passing of a new corporate due diligence bill in the first reading on March 30, 2015, the discussion about the imposition of mandatory duties and sanctions for companies, which in the context of their extraterritorial business activities have been violating human rights either directly or through their subsidiaries and suppliers, has gained fresh momentum. Establishing a duty of vigilance on parent companies and subcontractors,[1] the bill is based on three pillars: a comprehensive due diligence audit requiring companies to monitor the spheres of human rights, the environment and corruption also beyond narrow economic parameters; the strengthening of the role of courts, as well as efficient redress for victims of human right abuses (a fine of up to 10 million euros plus publication of the verdict).
Despite the heavy compromises it suffered in the view of its initiators, the passing of the bill in the first reading still is a milestone in the European history of human rights,[2] adding to a number of ongoing processes in the field of human rights at both the national and international levels. Other important steps include the June 2014 UN Human Rights Council’s majority voting in support of a resolution for establishing a working group tasked with the elaboration of an international legally binding instrument on transnational corporations.[3] The UN Committee on Economic, Social and Cultural Rights (CESCR) in its concluding observations on Austria issued on Nov. 29, 2013, expressed its concern at the lack of oversight over Austrian companies operating abroad. It calls upon Austria to ensure that all economic, social and cultural rights are fully respected and rights holders adequately protected in the context of corporate activities.[4]
The Network Social Responsibility (NeSoVe) over the year 2015 contributed to the discussion of human rights due diligence policies by presenting a substantiated legal opinion and hosting, together with its cooperation partners (Austrian Chamber of Labour for Vienna, Südwind, AG Globale Verantwortung, Dreikönigsaktion der Katholischen Jungschar, vida labour union, Austrian League of Human Rights, World Vision, Fairtrade Austria, ksoe, ECCJ), three discussion forums.
In the legal opinion commissioned and published by the Austrian Chamber of Labour for Vienna and the Network Social Responsibility (NeSoVe), the European Center for Constitutional and Human Rights put forward a comparative survey of European companies’ due diligence practices in their extraterritorial business activities, also examining the remedies accessible to victims of corporate human rights abuses, and the frame conditions confronting companies when engaging in human rights-related foreign activities. [5] As its main finding, it determined that in Austria due diligence policies as proposed by the United Nations Guiding Principles on Business and Human Rights for companies, including their subsidiaries and suppliers, are not being implemented. Neither have there been any lawsuits filed relating to a company’s exterritorial business activities with an explicit human rights component.
Among the reasons why the clarification and specification of corporate due diligence policies could go a long way toward improving the protection of human rights with possibly dramatic consequences are the following:
- Civil law provides for the institute of due diligence also under tort law (non-contractual civil damage claims). Its expansion and the clarification that due diligence also applies to human rights issues would therefore be easy to introduce in formal terms.
- Provisions regulating non-contractual damage claims already allow for certain alleviations of the burden of proof. In practice, one of the main challenges confronting victims of human rights abuses is the requirement to produce evidence against transnational corporations with most complex organizational structures.
- Due diligence obligations are attributed to the country in which the company concerned is domiciled, which in cases of human rights abuses involving a European company makes it easier to substantiate Austrian/European jurisdiction.
- In France and in Switzerland there are already reform movements underway advocating the implementation of human rights due diligence policies.
At a discussion forum on “Human Rights and Corporate Responsibility”[6] hosted jointly with CSR Dialogue on June 16, 2015, stakeholders examined companies’ possibilities in terms of protecting human rights in international supply and value creation chains by implementing CSR initiatives on a voluntary basis. Representatives of Fairtrade International, Göttin des Glücks and the Common Welfare Economy provided an impressive overview of the potentials of CSR initiatives and approaches implemented so far. Regarding initiatives in the legislative field, great interest was devoted to the European Parliament’s call for developing a legally binding instrument for the textile industry.[7]
As a shortcoming of an approach that relies on voluntarism, some debaters pointed out that it will not prevent “black sheep” from putting profits before the protection of fundamental human rights, thus failing to enforce human rights standards on a global scale. Moreover, it was held, the lack of regulation of entrepreneurial activities was a structural problem of both economic and democracy policies, with the relationship between business and politics being pervaded by neoliberal principles. Criticism was also levelled against framing the debate in terms of “regulation versus voluntariness”, given the fact that particularly over the past few years hard-law and soft-law initiatives have continued to merge into a promising patchwork at both the international and the national levels.[8]
Regarding the mandatory implementation of due diligence policies, on the other hand, concerns were brought up as to the immense amount of red tape this would create, although the problem was viewed as manageable through a sector-specific approach providing for concrete benchmarks and indicators as put forward, e.g., by the roundtable on human rights in tourism.[9] Yet all participants agreed that any serious handling of the adverse impacts of one’s own business activities on the environment and on human rights certainly does involve an extra amount of effort. In particular, it necessitates additional communication channels and report structures that need to be established, maintained and managed properly and––as proposed in the UNGP and called for by many NGOs such as Südwind––also apply to subsidiaries and suppliers. It became evident, though, that this is an issue requiring a more in-depth debate and heightened awareness of the wide array of stances and points of view.
Another talking point at this meeting––as well as at the parliamentary roundtable Menschen.Rechte.Wirtschaft [Humans.Rights.Economy][10] convened on Oct. 13, 2015––were the potential competitive disadvantages the imposition of due diligence obligations in foreign operations might have for Austrian companies. After all, it was argued, even leaving aside the potential increase of red tape, there are more than a few transnational corporations that actually do profit from human rights abuses. “Thus, it is considered as a given that the less insubordinate unionists and the less workers’ rights, the higher profits. The same holds for environmental protection which likewise has a cost-increasing effect. Hence, economic, social and human rights are perceived as something standing in the way of achieving that end.”[11]
However, this argument works in the other direction as well: the stricter the regulations, the better the protection for import-competing industries. Facing stringent rules on due diligence combined with internal audits, foreign producers will be forced to adapt production parameters to comply with domestic standards thus raising their production costs. In addition, domestic companies have a say when it comes to the formation of laws.
Finally, clearly defined human rights due diligence regulations will establish legal certainty. Already, a number of lawsuits have been filed against companies such as KIK Textil- und Non Food GmbH in Germany, Dutch Shell in the Netherlands etc., and legal reform movements like the ones active in France and in Switzerland will certainly motivate victims to seek redress before European courts even despite a certain legal vagueness; the general provisions of the non-contractual and contractual right to damage claims offer the judiciary a great deal of discretion in this respect. So, predictability regarding due diligence obligations and their scope should rather be seen as in the interest of domestic companies. This was underscored also at a seminar for legal experts on June 15, 2015, when one lawyer claimed that the call for the implementation of due diligence into Austrian civil law was tantamount to lobbying for domestic businesses. Knowing the law and its practice, having good contacts with the press and a wide network of attorneys, the handling of cases under Austrian jurisdiction would be kind of a home game for them.
While participants agreed that the issue of competitive disadvantages for Austrian businesses is set to remain the key point of debates over the tightening of due diligence regulations, views differed widely as to how to assess this aspect, which suggests that the discussion is far from over. Dominique Potier, a member of the Assamblée National and initiator of the French legal initiative, at the Oct. 13 roundtable compared the reform of corporate due diligence policies to the introduction of workers’ protection laws and the abolition of slave trade. According to him, Europe has the moral duty to efficiently implement human rights laws to open a new chapter of justice in the era of globalization.
The June 15 seminar also saw an in-depth discussion of the findings of the new study. Participants unanimously dismissed the widely held notion that national legislations do not allow for extraterritorial application. Referring to the already existing extraterritorial reach notably of financial and trade law, they argued that, technically, nothing speaks against extending it to environmental and human rights issues; rather, this was a matter of political will. At the same time, it was noted, the non-binding character of the UNGPs does not provide for their mandatory implementation at the national level. Unanimity in the UN Human Rights Committee could be achieved exactly because of this fact, which leaves implementation widely to the discretion of the individual nation states.
No definite answer was found to the question to what extent human rights-related extraterritorial business activities are regulated under current non-contractual damage rules. As a matter of fact, in Austrian law there is no explicit mentioning of them, nor are there records of court proceedings with a foreign component. Nonetheless, some debaters denied the necessity of legal reform, pointing out that victims’ of human rights abuses right to redress is already enshrined in general due diligence obligations. If anything, the problem here is rather one of the reluctance to seek recourse to the law typical of Austria.
The recommendation by the study that the Austrian National Council adopt a resolution to push through a legislative initiative was met with criticism. At the Oct. 13 roundtable, debaters agreed that while such a resolution could bring discussions into parliament, this was no empirically valid way to bring about any law amendment. Rather, it was up to the coalition government to make the issue of business and human rights a key priority, possibly in connection with the amendment of tort law envisaged in the governmental agreement.[12]
Endnotes
[1] La loi relative au devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre (n° 2578), accessible online at http://www.assemblee-nationale.fr/14/dossiers/devoir_vigilance_entreprises_donneuses_ordre.asp
[2] Cf. http://www.amnesty.fr/Nos-campagnes/Entreprises-et-droits-humains/Actualites/France-le-debat-sur-la-proposition-de-loi-sur-le-devoir-de-vigilance-se-prolonge-16563
[3] http://www.ohchr.org/EN/HRBodies/HRC/WGTransCorp/Pages/IGWGOnTNC.aspx
[4] http://www.fian.at/assets/CESCR-WSK-Pakt-4-oesterr-Staatenpruefung-Concluding-Observations-nichtamtl-dt-Uebersetzung.pdf
[5] Bueno/Scheidt, Die Sorgfaltspflichten von Unternehmen im Hinblick auf die Einhaltung von Menschenrechten bei Auslandsaktivitäten, Oktober 2015: http://www.netzwerksozialeverantwortung.at/media/Pub_Rechtsgutachten_ECCHR.pdf
[6] http://www.csrdialog.at/menschenrechte/aktuelles-termine-menschenrechte/
[7] http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P8-TA-2015-0175+0+DOC+XML+V0//DE
[8] These include the UNGPs, the working group for the development of an international instrument for the economy and human rights, the OECD guidelines, or initiatives such as the Initiative Conflict Minerals, the Austrian union responsibility law etc.
[9] http://www.menschenrechte-im-tourismus.net/fileadmin/user_upload/Menschenrechte/RT_Human_Right_in_Tourism_ENG_02.pdf
[10] http://www.nordsueddialog.org/aktivitaeten/oesterreich/awepa-sektion/
[11] Gruber/Kaufmann: Wettbewerbsvorteil Menschenrechtsverletzung?: http://issuu.com/ug_oegb/docs/2014-09?e=1788734/9093931
[12] Cf. https://www.bka.gv.at/DocView.axd?CobId=53264, p. 87.