Banks and Human Rights: Strengths and Weaknesses of the Thun Group’s discussion paper – “The Guiding Principles on Business and Human Rights: An Interpretation for Banks”

 

Thun

Thun, Switzerland – Copyright: http://www.myswitzerland.com/

It is a pleasure to welcome Damiano de Felice to Rights as Usual. Damiano de Felice is co-Director of Measuring Business & Human Rights, a PhD Candidate at the London School of Economics, and a member of the World Economic Forum’s Global Agenda Council on Human Rights.

This blog post is his and it was originally posted at RightingFinance (www.rightingfinance.org).

You can download Damiano de Felice’s full report here.

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In May 2011, four European banks (Barclays, Credit Suisse, UBS and UniCredit) came together in Thun, Switzerland, and created an informal group (the Thun Group of Banks) to explore what the United Nations Guiding Principles on Business and Human Rights (UNGPs) mean for the banking sector. In October 2013, the Group (enlarged by the participation of three additional members: BBVA, ING Bank N.V. and RBS Group) released its first public document, a discussion paper entitled “The Guiding Principles on Business and Human Rights: An interpretation for banks”.

Several commentators emphasised that the discussion paper represents a critical step in the way to delineate the human rights responsibilities of the financial sector. According to KOFF Centre for Peacebuilding, the document shows, for the first time ever, “a common understanding amongst the companies involved that respect for human rights is an integral part of the business”. At the 2013 UN Annual Forum on Business and Human Rights, the document was hailed as a “paradigm shift” for thinking on human rights in the banking sector, in spite of its shortcomings. Sudeep Chakravarti argued that the paper is “a must-read for financiers, their clients, corporate governance and human rights specialists, and teachers and students of business schools”.

The foundational aspect of the Thun Group’s discussion paper makes it particularly important that the seven banks ‘get it right’ from the very beginning and avoid any misinterpretation of their responsibilities. A false start can have long-lasting repercussions (in terms of both poor legal risk management and adverse human rights impacts). In addition, the document is likely to influence the way in which other (private and public) financial institutions integrate human rights into their operations.

Against this background, I followed the lead of other experts (including BankTrack, Andreas Missbach, Ariel Meyerstein and Sarah Altschuller) and wrote a detailed report on the main strengths and weaknesses of the discussion paper. You can find the report here, and a summary of my arguments here below.

The seven banks should be praised because …

… they acknowledge that the UNGPs represent “a new overarching single point of reference for business and human rights” (p. 4). The banks therefore formally accept that the UN document is the starting point for any discussion on their responsibility to respect human rights.

… the discussion paper is the first comprehensive analysis on how the UNGPs can be integrated into all the activities of universal banks (from retail banking to asset management). Other initiatives, like the Equator Principles, are still limited to specific types of activities (for instance, project finance and a few related services).

… the Thun Group concedes that banks should conduct human rights due diligence not only because of the reputational and financial advantages that it offers (the so-called “business case” for human rights), but also because it is “the right thing to do” (p. 3). This is important because adverse human rights impacts must not be discounted when they are linked to profitable opportunities.

… the discussion paper heavily draws on the UNGPs to describe how banks should express their policy commitment to respect human rights. Among numerous positive elements, the banks recognize that their human rights policies should not be ring-fenced in one part of the organization, but should “apply to all parts of the business” (p. 6) and concede that it is “critical to seek senior management buy-in at the outset” because staff need to know that they are supported in considering the issue (p. 7).

… the Thun Group recognizes that the human rights due diligence process should:

  • be “an ongoing process, not something to be completed once and not revisited” (p. 16);
  •  “take a broader view of their potential impacts rather than focusing solely on their own commercial and reputational risks” (p. 9) and be based on “a risk management model that goes beyond traditional parameters, to address (identify, manage and mitigate) human rights risks to external stakeholders” (p. 5);
  • pay “heightened attention” to groups “who are particularly vulnerable to human rights violations in a specific context, even though the bank’s connection to these violations may be remote” (p. 10).

The seven banks should be criticized because …

… they fall victim of what Mary Dowell-Jones named the “subsidiary approach”, that is, they focus only on those human rights impacts that arise via the actions of banks’ clients. Yet, banks can abuse human rights in numerous other ways. Just to offer a few examples, banks can abuse the human rights of their employees (e.g., long working hours, macho culture and discrimination against women) and their customers (e.g., discriminating against female customers, such as pregnant women and women on maternity leave seeking mortgages). In addition, adverse human rights impacts have been linked to banks’ activities in derivatives markets (e.g., exacerbation of financial crisis through irresponsible lending and volatility of food markets because of aggressive speculation).

… the Thun Group is silent with respect to other banks’ activities that have been linked to human rights abuses, such as lobbying , land grabbing and tax avoidance.

… the discussion paper fails to mention the importance of creating valid and reliable indicators of respect for human rights in order to integrate human rights issues into financial decision-making processes and align internal incentives with the human rights statement of policy.

… the wording of the discussion paper suggests that reporting is purely voluntary. Yet, according to the UNGPs, businesses should, not “may wish to” (p. 19), be prepared to communicate how they address their human rights impacts. A higher level of transparency is widely considered to be a key feature for a more sustainable financial sector.

… according to the Thun Group, if clients need funds for general corporate purposes (such as strengthening the working capital), banks should only look for responsible “management systems and structures” and not check the “potential impacts of specific investments” (p. 15). This is problematic because the activities of the clients often reveal more about their human rights records than the procedures written on paper.

… the discussion paper intentionally avoids to address the need for greater access by victims to effective remedy. This is disappointing because UNGP 22 is clear that, where business enterprises “identify that they have caused or contributed to adverse impacts, they should provide for or cooperate in their remediation through legitimate processes”, and the UN Working Group on business and human rights recently confirmed that “lending money to a company to construct a large processing plant built on a community land where a village was displaced to make way for the project without appropriate consultation or compensation as per international resettlement standards” is an example of “contributing to adverse human rights impacts”.

… the discussion paper ignores the five “foundational principles” (UNGPs 11-15) and the two principles that deal with “issues of context” (UNGPs 23-24). Acting this way, the Thun Group overlooks important aspects of the corporate responsibility to respect. To cite just one example, UNGP 11 recognizes that banks may undertake other commitments or activities to support and promote human rights, which may contribute to the enjoyment of rights. However, this does not offset a failure to respect human rights throughout their operations. This is particularly important because the sustainability reports of numerous banks still focus on philanthropic activities.

… the discussion paper reports that its drafting process benefitted from support of the Competence Center for Human Rights at the University of Zurich and a small group of individuals who had already been involved in drawing up the UNGPs. Yet, no meaningful consultation took place with affected stakeholders and human rights NGOs. Effective engagement with potential victims and/or their representatives is also missing from the recommendations included in the document: there is only one reference under the “Reporting” section. The UNGPs recommend effective engagement with affected stakeholders at all stages of the human rights due diligence process.

Arguably, the last element of criticism is the most problematic. The definition of banks’ human rights responsibilities still presents abundant unresolved dilemmas (e.g., how to assess severity of human rights abuses and thus prioritize action? Under what circumstances do banks have higher leverage?) and Ruggie’s mandate has showed that long-lasting solutions can only be achieved through a participatory and inclusive approach.

On 5 June 2014, the seven banks invited a few external stakeholders in Thun to discuss recent evolutions and future plans. The hope is that such a small step denotes a bigger change in attitude.

On 19 August 2014, the Thun Group published a response to the  feedback they received on the discussion paper.

Making Sovereign Financing and Human Rights Work

 

20140704_151517Hart publishing has just published Making Sovereign Financing and Human Rights Work edited by new UN Independent Expert on the effect of foreign debt, Juan Pablo Bohoslavksy and my colleague Jernej Letnar Černič.

The official book presentation reads as follows:

Poor public resource management and the global financial crisis curbing fundamental fiscal space, millions thrown into poverty, and authoritarian regimes running successful criminal campaigns with the help of financial institutions are all phenomena that raise fundamental questions around finance and human rights. They also highlight the urgent need for more systematic and robust legal and economic thinking about sovereign finance and human rights.

This edited collection aims to contribute to filling this gap by introducing novel legal theories and analyses of the links between sovereign debt and human rights from a variety of perspectives. These chapters include studies of financial complicity, UN sanctions, ethics, transitional justice, criminal law, insolvency proceedings, millennium development goals, global financial architecture, corporations, extraterritoriality, state of necessity, sovereign wealth and hedge funds, project financing, state responsibility, international financial institutions, the right to development, UN initiatives, litigation, as well as case studies from Africa, Asia and Latin America. These chapters are then theorised by the editors in an introductory chapter. 

In July 2012 the UN Human Rights Council finally issued its own guidelines on foreign debt and human rights, yet much remains to be done to promote better understanding of the legal and economic implications of the interface between finance and human rights. This book will contribute to that understanding as well as help practitioners in their everyday work. The authors include world-renowned lawyers and economists, experienced practitioners and officials from international organisations. 

I have had the pleasure to contribute a chapter on financial complicity in international crimes, a sub-area of the larger field of corporate complicity in international crimes, such as crimes against humanity and war crimes. Interrogations about the liability of financiers and lenders of criminal regimes are not new. Following the Second World War, the chairman of the Dresdner Bank and the deputy to the president of the Reichsbank were prosecuted for their financial support of the Nazi regime. The chapter explores these cases in some detail, as they provide an entry point to the following fundamental question: whether lending money and providing commodities can be distinguished for the purpose of establishing complicity. In other words, when it comes to lenders, should financial complicity be distinguished from corporate complicity in general, or should money be treated as any other commodity?

Because the law on financial complicity in international crimes is in its infancy, there is still no consensus on mechanisms by which financial backers of international criminals could be held liable for the crucial role they play. However, there is now a robust set of rules to establish liability in the context of financing terrorist activities. The chapter considers the lessons that can be learnt from such developments and explores the appropriateness of calling for international legislation on financial complicity in international crimes, for example in the form of a treaty.

Does the world need a business and human rights treaty?

Two weeks ago I had the pleasure to participate in a debate on the much-discussed business and human rights treaty, co-organised by the University of Notre Dame Law School and the Business and Human Rights Resource Centre. I was part of the “sceptic” side along with Chris Esdaile from the law firm Leigh Day, while Professor Chip Pitts (Stanford) and Professor Sheldon Leader (Essex) were supporting the idea of a treaty. I already wrote on the issue in a previous post. The debate and the Q&A session were filmed.

The idea of a binding treaty is clearly appealing to those who dismiss the UN Guiding Principles  (UNGPs) as being just voluntary and of no or limited value value in the real world. But it is also appealing to supporters of the UNGPs (such as me) who view the UNGPs as a formidable tool to induce change. In the history of international human rights law, many binding treaties followed the prior adoption of a non-binding document. For example, the twin 1966 International Covenants on Civil and Political Rights, and Economic, Social and Cultural Rights followed the initially merely declaratory Universal Declaration of Human Rights. Therefore the idea of a treaty should flow almost naturally from the work done by Ruggie and his team. Nevertheless, I am largely against the opening of negotiations for a binding business and human rights treaty at this point. Among many others reasons, let me focus on two.

First, “business and human rights” covers incredibly wide ground. It touches upon various and complex areas of law such as international criminal law, international human rights law, investment law, world trade law, financial law, tort law, contract law, environmental law, tax law, etc. The risk is therefore to adopt a treaty that would fail to recognize this complexity. It would set out principles that could be at odds with established law, hence creating confusion and difficulties of implementation.

Second, and linked to the previous point, comes the question of contents. A conservative (I would say realistic) treaty would follow the classic model: an instrument adopted by states, whereby they bind themselves and commit to introduce changes in their domestic law and practice. Perhaps it would contain a monitoring mechanism similar to those contained in other UN Human Rights treaties, i.e. one based on a periodic reporting process. It could also include a (quasi) judicial mechanism whereby victims of abuse could bring a claim against a given state. I really do not see how claims could be brought directly against corporations using that system. That gap could lead to understandable frustration on the part of victims and NGOs.

Beyond monitoring, I see the issue of the type of rights covered as a major one. To me, a treaty limited to civil and political rights would be extremely disappointing and unfortunately I cannot see western states adhering to a treaty championing economic, social and cultural rights anytime soon. One option would be to not list rights as such but to remain vague and refer to the relatively uncontroversial Universal Declaration of Human Rights. The treaty could then cover drier but fundamental questions such as jurisdiction over abuses committed by subsidiaries or contractors of multinational companies operating in various countries.

Another option would be for the treaty to be only about international crimes over which a solid consensus already exists. Although this is a tremendously important aspect (see below), a new treaty with such a limited scope would cover a minority of the corporate human rights abuses committed around the world. Arguably, this is not the treaty most victims need.

What, then, should we be doing? In my short talk I suggested two routes.

First, despite what I said above, I think the question of corporate involvement in international crimes, although thankfully marginal, is a key one. I therefore called for an amendment to the Rome State establishing the International Criminal Court so as to allow the Court to exercise jurisdiction over corporations. It would be a symbolic move on a relatively non contentious matter. Who could seriously argue that it would be acceptable for a company to engage in genocide? While the question of whether companies have international human rights obligations is still debated, there should be no question that they must refrain from committing violations that amount to international crimes such as genocide, crimes against humanity and war crimes.

Second, and perhaps more importantly, I believe there is still room to manoeuvre within the existing international human rights legal framework. Treaties impose direct obligations on states but many of them also impose obligations to prevent and redress violations committed by third parties such as corporations. Despite a few cases that have reached international courts and bodies (e.g.: Lopez Ostra v Spain; Social and Economic Rights Action Center (SERAC) and Center for Economic and Social Rights (CESR) v Nigeria), this is a largely under-explored route. I know that a claim was recently brought against Belgium before the European Court of Human Rights for failure to provide a remedy to Burmese victims after Belgian courts dropped a case against Total but I have no further information on this (if you do, please let me know in the comments section). I realize that this case in particular opens the question of the extraterritorial reach of human rights treaties, one that I have already discussed on this blog (here and here) and about which there is little state enthusiasm.

Less controversially, and without going as far as asserting extraterritorial jurisdiction over the worldwide operations of companies domiciled in their territories, I am of the opinion that there is a lot more that states could do to regulate both the domestic and international operations of companies, through the adoption of so-called measures with extraterritorial implications John Ruggie mentioned in his commentary of Guiding Principle 2. I think this is not only in line with existing treaties but also, in some cases, required.

So how about giving that route a chance rather than trying to reinvent the wheel and engage in uncertain, lengthy and costly treaty negotiations?

Juan Pablo Bohoslavsky: new United Nations Independent Expert on the effects of foreign debt

On 8 May 2014 the United Nations Human Rights Council appointed Juan Pablo Bohoslavsky as the new Independent Expert on the effects of foreign debt. He will take over from Cephas Lumina. I had the pleasure to work with Juan Pablo in the past months as one of the contributors to a book titled Making Sovereign Financing and Human Rights Work which he co-edited with Jernej Letnar Černič. My chapter is on Establishing Liability for Financial Complicity in International Crimes.”

The mandate is of great relevance to the business and human rights field as it seeks specifically to look at the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights. It is a multi-faceted and overall fascinating area of law and policy. I look forward to covering the work of the mandate on this blog.

Congratulations Juan Pablo, and best of luck with the mandate!

Launch of the “Human Rights at Sea” Initiative

 

 

On 3 April 2014 I had the pleasure to attend the launch of the Human Rights at Sea (HRAS) Initiative on board HMS President in London. David Hammond from 9 Bedford Row International Maritime Practice (London) is the founder of the initiative and the post below is his.

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The HRAS’ aim is to raise awareness of, and improve implementation and accountability for human rights throughout the maritime industry, especially where human rights protection is currently absent and rights are being abused.

Following over six months of concept development and continuing engagement with members of the international shipping community, State representatives, maritime associations, marine insurers, international lawyers, maritime charities and civil society NGOs, our independent maritime human rights’ platform has now gone live. The developing work areas remain a ‘work-in-progress’ and the initiative is an iterative process developed through ‘Supporting Entities’ and ‘Collaborative Partnerships’.

It is an independent international website that will provide a platform for maritime human rights discussions, lobbying, and sharing voluntarily applied commercial documentation covering the daily use of, policies for and understanding of human rights. The initiative will also develop a maritime position in relation to the 2011 UN Guiding Principles for business and human rights implementing the “Protect, Respect and remedy Framework”, which has yet to be undertaken.

The HRAS initiative has a number of key focal points and developing work areas that are being contributed to by international stakeholders. This is vanguard work and its strength is in the engagement by multiple international entities, all of whom have an interest in raising awareness of human rights issues at sea.

For further details, contact: david.hammond@9bedfordrow.co.uk.

Corporate Accountability for Human Rights Violations in Countries in Transition

© Photograph by Brittany Kaiser

 

Yesterday I had the pleasure to give a talk at the 9 Bedford Row International Conference on “Human Rights in Post-Revolution States” on board HMS President, the beautiful World War I warship docked on the Thames. My talk was on “Corporate Accountability for Human Rights Violations in Countries in Transition”.

The area of corporate accountability and transitional justice is relatively under explored. As far as I know there is only one book tackling it head on, “Corporate Accountability in the Context of Transitional Justice” edited by my colleague Professor Sabine Michalowski from Essex.

To make my talk more lively, I chose to present a selection of cases, or situations, so as to highlight the type of issues that are likely to arise when trying to hold corporations, or business people, accountable for human rights violations in countries that have transitioned from conflict to peace, or from authoritarian rule to democracy. I focused on the following cases:

1. Post World War II trials against industrialists and bankers in US zone of occupation in Germany;  2. The South African Truth and Reconciliation Commission’s findings on business (see previous post here); 3. The Apartheid cases before US federal courts (see previous post here); 4. The Van Anraat case in the Netherlands; and 5. The ongoing Amesys and Qosmos cases in France.

All of these cases bring to the fore the following question, which is fundamental to the business and human rights field: where to draw the line between making profit by doing business with a criminal regime, and being criminally or civilly liable?  There is much uncertainty around this and unfortunately these cases provide no definite answers. In this context, I am expecting a lot from the Amesys and Qosmos cases which I hope to be able to review on this blog if/when trials are held in the future.

 

 

 

Short Human Rights Course at Middlesex – including half a day on “Business and Human Rights”

 

The intensive course “Confidence Crisis in Human Rights: Implications for the UK” will be held from 30 June to 4 July 2014 at Middlesex University School of Law, London. Human rights research is going strong at Middlesex. It is the home of world-renowned experts in the field, such as Professor William Schabas, who will be teaching various parts of the course.

The course will cover issues such as: the UK attitude towards to the European human rights system; hate speech; freedom of religion; the impact of austerity measures on human rights; migration; human rights in times of war and the actions of the Security Council; the environment; and business & human rights. I will be covering “business & human rights” for a whole morning on 4 July.

The course is for everyone with an interest in human rights issues such as journalists, policy makers, and students.

For the application form and for further information, please visit the webpage. You can also check the course brochure.

Tuition fee: £400 (£200 for Middlesex alumni). Accommodation, travel costs and other expenses are not included.

Will “business and human rights” become part of legal training in England and Wales?

© Photograph by Sarah Lee for the Guardian

Many thanks to my colleague Dr Susan Pascoe for the info.

On 26 March 2014 the Law Society (of England and Wales) Gazette reported that the Society’s Business and Human Rights Advisory Group recommended that business and human rights become part of legal training requirements and continued professional development.

This seems to be at a very early stage still, and just a recommendation for now.  It is nevertheless encouraging to see that the issue is taken seriously by at least some practitioners. While I do think it is a positive development I can see how this is not going to be unanimously welcomed, especially given the myriad of pressing issues the profession is currently facing, ranging from the tight economic situation to the dreaded legal aid reform. Some in the profession may legitimately consider that this is not immediately relevant to them and it will be down to the business and human rights community to do our best to convince them otherwise.

Documents such as the Equality and Human Rights Commission’s Guide to Business and Human Rights addressed directly to businesses – especially SMEs -  and drawing on research conducted by Dr Jérémie Gilbert and myself may prove helpful in this regard. Human rights are relevant for all businesses and therefore it is not unrealistic to expect solicitors to be able to advise clients on these issues.

Lecture on “Corporate Crimes and the ICC” at Summer School in Galway 16-20 June 2014

 

 

The annual International Criminal Court Summer School at the National University of Ireland (Galway) will take place on 16-20 June 2014.

The Summer School consists of five days of intensive lectures given by leading specialists on the subject. The summer school is attended by legal professionals, academics, postgraduate students and NGOs. Participants are provided with a detailed working knowledge of the establishment of the Court, its structures and operations, and the applicable law. Lectures also speak to related issues in international criminal law, including: genocide, war crimes, crimes against humanity, the crime of aggression, universal jurisdiction, immunities, and the role of victims. This year they also have a lecture specifically on Africa and the ICC.

I will be teaching a class on Thursday 19 June on “Corporate Crimes and the International Criminal Court”.

Full details can be found on the Summer School’s dedicated website.

Caribbean Slavery Reparations Plan: What about the Private Sector?

 

Fort George, Port of Spain (Trinidad and Tobago)

 

On Monday 10 March 2014, Caribbean leaders gathered in Saint Vincent and the Grenadines for a CARICOM meeting adopted a 10-point plan “to achieve reparatory justice for the victims of genocide, slavery, slave trading, and racial apartheid.”

The plan consists in: (1) demanding a full formal apology from European governments for the colonization of the region and the slave trade; (2) seeking help in setting up a repatriation plan for those Caribbean people of African descent who wish to “return” to Africa; (3) setting up an indigenous peoples development programme, as they remain “the most marginalized social group within the region”; (4) developing cultural institutions such as museums and research centres to help educate Caribbean people (and visitors) about their past; seeking European participation to address (5) public health issues deriving from poverty, itself deriving from past enslavement; and (6) illiteracy; (7) developing an African knowledge programme in order to build “bridges of belonging” between Caribbean people of African descent and the African continent; (8) initiating a process of psychological rehabilitation to overcome the collective trauma of slavery, for example through the development of stronger inter-Caribbean political institutions; (9) actively calling for technology transfers as the Caribbean were deliberately excluded from industrialization by colonizing nations; and last but not least (10) demanding debt cancellation.

Martyn Day from the London-based law firm Leigh Day provided legal advice to the Reparations Commission who drafted the plan. The firm is well-known to the business and human rights community for having acted on behalf of several thousand Nigerian claimants in a claim against Royal Dutch Shell, and on behalf on the claimants in the Trafigura case regarding the dumping of toxic waste in Côte d’Ivoire. Perhaps more immediately relevant to the slavery reparations issue, in 2013 Martyn Day acted on behalf of Kenyan people tortured by British forces in the 1950s and managed to secure compensation as well as a ground-breaking expression of regret from the Foreign and Commonwealth Office. Although the 10-point plan does not include litigation, the firm is therefore no stranger to historical claims.

The slave trade and the use of slave labour in the Americas and the Caribbean is a widely-known historical human rights violation, and it is one in which businesses, along with governments, played a major role. While a number of the companies engaged in the slave trade itself, such as the Royal African Company (see the recently published book by my colleague, historian Dr William Pettigrew), were chartered (i.e. partly public by modern standards), slave trading and the sugar plantation economy hugely benefitted the private sector, in particular businessmen of 16th , 17th, 18th and 19th century Europe. With that in mind, and if the “travail de mémoire” is to be properly done, then the private sector should not be forgotten in the implementation of this plan.

Realistically, it is hard to see why modern companies should be formally called to account in any way since, unlike European nations, the companies involved are likely to have disappeared long ago. Nevertheless, I can think of different ways in which the private sector’s more than marginal implication in the crimes committed could be acknowledged. Businesses could be mentioned in (forthcoming?) apology statements by European governments. Furthermore, a virtuous “coalition of the willing” from the private sector could participate, as an act of philanthropy, to the funding of a state-of-the-art history museum in the Caribbean, which would tell the stories of the various communities of the region.