On 25 October 2013, 9 Bedford Row International in partnership with Middlesex University School of Law will hold their annual conference on international law. This year the theme is “Human Rights and International Challenges”. The Dean of Middlesex School of Law, Professor Joshua Castellino, will be chairing the conference and my colleague Professor William Schabas will give the keynote speech on “The Birth of the Universal Declaration of Human Rights.” I will speak in the afternoon on “Corporate Social Responsibility and Lawsuits against Corporations.”
The conference will take place on board the HMS President on the Thames in the heart of London, a really great historical venue.
Tickets can be purchased here (6 hours CPD).
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2013 is the year where everything seems to be happening in the business and human rights area. We now have a final decision in the Kiobel v Royal Dutch Petroleum Co saga before US Courts. And the much-awaited UK action plan implementing the 2011 UN Guiding Principles on Business and Human Rights is finally out. The government took its time to produce it and there was no shortness of consultations. In that context, expectations – at least my expectations – ran high.
The action plan document does not begin well. The first sentence opens with a reference to the dreaded “business case for respect for human rights”. I ought to write more about this at some point but it is still beyond me that anyone would consider it even remotely necessary to convince businesses that human rights should be respected. The message really ought to be that they have no say in the matter. By way of example, as an individual, do I have a say about whether or not to comply with the law and to refrain from harming other human beings? No. So why should businesses do? This is nonsensical.
Anyway. Beyond this initial disappointment, I have to be honest: while I am not impressed by this Action Plan, it contains some good ideas. One point caught my eye, the one about ensuring “that agreements facilitating investment overseas by UK or EU companies incorporate the business responsibility to respect human rights, and do not undermine the host country’s ability to either meet its international human rights obligations or to impose the same environmental and social regulation on foreign investors as it does on domestic firms in particular in the field of foreign investment.” Having spent the past weeks reading about investment arbitration, I can only be happy to read this. Sure, I would have preferred this to say that businesses have a legal obligation to respect human rights and that they would face prosecution, or administrative sanctions, or could be sued in tort if they don’t abide by this obligation, but even in my wildest dreams I knew this was not going to happen. So I will take this and I look forward to seeing this implemented in future Bilateral Investment Treaties.
Speaking of business activities overseas, one point is made crystal clear: the action plan supports “access to effective remedy for victims of human rights abuse involving business enterprises within UK jurisdiction,” but not outside the UK jurisdiction. While UK Courts are under an obligation to take on civil cases involving UK companies, no matter where the tort was committed, under the old Brussels I regulation (now in the process of being replaced by Regulation (EU) No. 1215/2012), this does not mean that victims will receive specific support to bring their case. In effect, it will continue to be a challenge, to say the least. This does not come as a surprise in the context of the recent legal aid reform but I think it is still worth mentioning.
The Action Plan is dense and I am sure I will get the opportunity to write about other aspects of it in the coming months, so watch this space.
In the past weeks I have been doing some research and writing in the field of international investment law and its interplay with human rights. To put it bluntly, my conclusion, as well as many other scholars’, is that there is little (i.e. not enough) consideration for human rights in arbitral awards and that re-balancing in this area would be a welcome move.
In this context, I came across the latest Caribbean Court of Justice (CCJ or the Court) judgement in the case of BCB Holdings Limited and the Belize Bank Limited v the Attorney General of Belize relating to the unenforceablility of an arbitral award on grounds of public policy and rendered on 26 July 2013. To be clear this case, delivered by the Honourable Mr Justice Adrian Saunders and the Honourable Mr Justice Winston Anderson, is not a human rights case by any stretch of the imagination. That said, I sense that this case could serve as a basis for this relatively new Court’s developing caselaw on business and human rights issues (I have reviewed their 2012 decision with regards to migrant workers rights here). In this post I will try to briefly explain why I think this is so.
The BCB case was about whether an arbitral award delivered by the London Court of International Arbitration (LCIA) was enforceable in Belize. The Court noted that, “there is universal consensus that courts will decline to enforce foreign arbitral Awards only in exceptional circumstances” and that “only where enforcement would violate the forum state’s most basic notions of morality and justice would a court be justified in declining to enforce a foreign Award based on public policy grounds” [para. 26]. Having established this high threshold, it went on to say that in the circumstances of the case, the award was indeed unenforceable on public policy grounds.
In this case, the companies and state of Belize had entered into a Tax Deed which created a favourable tax regime for the companies, “at variance with the tax laws of Belize”. The Deed was never approved by Parliament and following a change of administration in Belize, the new government simply terminated it. The companies went before the LCIA and, controversially, Belize never appeared before the arbitral tribunal. The arbitral tribunal held that Belize was in breach of its obligations and awarded the companies $44 million plus interest. The companies sought to enforce the award before the domestic courts of Belize. The trial judge ruled in their favour but the State successfully appealed to the Court of Appeal of Belize. The companies in turn appealed to the highest Court of Belize, the Caribbean Court of Justice.
In reaching its conclusion of unenforceability, which goes against the pro-enforcement bias that domestic courts ought to have with regards to arbitral awards, the Court based its reasoning on public policy, which according to the Court “must in the first instance be assessed with reference to the values, aspirations, mores, institutions and conception of cardinal principles of law of the people of Belize” [para 23].
However, the Court continued: “Where enforcement of a foreign or Convention award is being considered, courts should apply the public policy exception in a more restrictive manner than in instances where public policy is being considered in a purely domestic scenario. This is because, as a matter of international comity, the courts of one State should lean in favour of demonstrating faith in and respect for the judgments of foreign tribunals. In an increasingly globalised and mutually inter-dependent world, it is in the interest of the promotion of international trade and commerce that courts should eschew a uniquely nationalistic approach to the recognition of foreign awards” [para. 24].
The public policy argument must be carefully handled and the Court refers to the “international public policy” exception that should be applied in cases where foreign or international judgements, as was the case in that instance, are at stake [para. 27].
Upon analysing the legality of the Deed, the Court concludes that the executive did not possess the power to enter what was essentially “a whole new tax policy for the benefit of the Companies” [para. 51]. Relying heavily on the principle of the separation of powers, they further state: “In our judgment, implementation of the provisions of the Deed, without legislative approval and without the intention on the part of its makers to seek such approval, is indeed repugnant to the established legal order of Belize” [para. 53]. Moreover, “the public policy contravened in this case falls well within the definition of ‘international public policy’” [para. 61].
The possible “business and human rights” implications
This is a carefully drafted decision that will nonetheless appear bold in a context where business interests are often over-protected in arbitration awards. More importantly for our purposes, I believe it may have implications in the business and human rights area in the future for two main reasons.
First, while the Deed in this case was about tax cuts, we can imagine a state entering into similar agreements purporting to shield a company from the health and safety, environmental or labour law regulations otherwise in force in the country. Indeed this scenario is far from exceptional in the context of foreign direct investment. In such a case, the decision of the CCJ would allow the state, or victims of corporate abuse, to claim that such decisions ought to be approved by Parliament, allowing some degree of transparency, and not negotiated behind closed doors in a Minister’s office.
Second, and more fundamentally, it is interesting to see a Supreme Court such as the CCJ consider public policy arguments with regards to the enforceability of arbitral awards. Having looked into such arguments with regards to that issue, one can hope that for instance if a case on indigenous peoples rights in the context of mining or logging concessions comes before the Court, they will also look at the wider context, “basic notions of morality and justice” to the benefit of the companies, but also to the benefit of local populations in a clear and balanced way. As the CCJ has made clear in the BCB decision, public policy arguments will not always work against business interests. The threshold for the exception to work is so high that in fact it is quite the contrary and it is in the interest of predictability that it remains that way. However, a careful use of this exception can help re-balancing otherwise profoundly unequal relationships.