The Business of Human Rights

Canadian Bar Association Warren Ragoonanan is the Chair of the International Law Section and Tina Parbhakar is the Section’s Past Chair in The CBQ

The Canadian Bar Association’s Business and Human Rights (BHR) Guide helps Canadian lawyers and their clients account for human rights in their operations.

What is the role of business when it comes to respecting human rights? The answer depends on who you ask, and what you are asking about. In Western liberal democracies, human rights are integrated into our constitutional order. There are clear legal consequences if human rights are ignored. It is easy to forget that this approach is not widely shared around the world. Does that mean that outside Canada, businesses can simply ignore human rights? No. Human rights laws, regulations and decisions are evolving constantly, and businesses face legal, financial and reputational exposure for failing to respect them – even if they do so unwittingly.

There are no easy answers here. That is why the Canadian Bar Association has added the new Business and Human Rights Guide to its practice tools. The CBA Guide is designed to help lawyers and businesses integrate human rights into their operations when acting abroad.

The risks

Human rights violations can be perpetrated by anyone from company directors to state actors, sub-contractors, or private security forces. They can happen anywhere along the global supply chain.

Relevant information and actionable guidance are some of the best ways for businesses to avoid being exposed to this risk. One of the CBA Guide’s fundamental goals is to help Canadian lawyers and businesses avoid getting caught up in problematic human rights situations. The Guide is also there to help them respond to situations that are hard to predict.

Businesses must have up-to-date knowledge of expectations on critical social factors like international human rights. Such factors change rapidly and can catch practitioners by surprise.

A changing legal landscape

We have been feeling the effects of globalization since the 1990s. That, coupled with the internet and associated technology, makes it possible for large and small businesses to operate globally. With so much foreign business influence in their economy, governments sometimes find challenges in their ability to oversee business activities and ensure that human rights are protected.

The United Nations Guiding Principle 13 explicitly states that businesses have the responsibility to avoid causing or contributing to adverse human rights impacts through their own activities and address such impacts when they occur; and to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.

Litigation risks

In recent years, there have been human rights cases brought by foreign litigants against Canadian companies. As outlined in the CBA Guide, there is now an emerging Canadian body of jurisprudence highlighting that Canadian businesses can be held liable for human rights abuses connected to their international operations. Surprisingly, when responding to such litigation, there are factors beyond just the legal issues which may drive the decision making process.

Often in business human rights litigation, what’s at issue isn’t the human rights violation itself but whether a company should be held legally responsible for that human rights violation. A company might well win in court but still lose in the marketplace and suffer great damage to its brand and reputation. A customer is much more likely to remember the association between a brand and an event abroad than they are to remember that the court actually found the company not liable. Just the fact that there was a court case might be enough to cause irreparable harm to a company’s reputation.

Businesses seen as having fallen short of their obligation to ensure human rights are respected can see their “social license to operate” undermined by public opinion. This can hurt the businesses’ ability to increase their market share, find employees, obtain regulatory approvals, and expand their operations to other countries.

International human rights obligations

There is no international obligatory standard of corporate liability when it comes to violations of human rights. However, human rights violations abroad may expose companies to criminal liability in their own countries for activities that happen elsewhere.

At the international level, criminal charges for alleged business complicity in international crimes are increasing – this includes activities that constitute crimes against humanity. The case of the French multinational Lafarge is particularly interesting. Both the parent company and its subsidiary, Lafarge Cement Syria, were indicted for complicity in crimes against humanity, among other charges, for the subsidiary’s operations during the Syrian civil war. This was the first time a French parent company was charged for the actions of one of its subsidiaries abroad. The case is still before the courts.

In addition to potential corporate liability, in some jurisdictions including the UK, France, California and Australia, directors and officers can also be held personally liable for failure to comply with human rights obligations.

Canada does not have a similar regime, but Bill S-216, the Modern Slavery Act, tabled in the Senate in 2020, tried to address some of these issues by making directors and officers personally liable for their actions if they directed, authorized, assented to, acquiesced in or participated in the offence, whether or not the person or entity has been prosecuted or convicted. If passed, the Bill will enact Canada’s first modern slavery disclosure legislation. Under current Canadian law, corporations (and possibly their directors and officers) can be held criminally responsible where a “real and substantial connection” can be made between Canada and the alleged offence. It is crucial for Canadian directors and officers to take note of how foreign legislation is impacting businesses operating in those jurisdictions to inform their assessment of potential liability that may arise in Canada.

Mandatory disclosure

Provincial securities legislation obliges Canadian public companies to disclose material risk to their business. This includes business human rights issues that would be material to any reasonable investor. But other than in Quebec, at the moment, there are no concrete requirements that public companies disclose BHR or modern slavery risks.

However, Canadian companies that operate in jurisdictions with regulations requiring disclosure of BHR or modern slavery risks, such as the UK, France, California and Australia, are subject to disclosure requirements in those jurisdictions. Businesses often find that the least costly approach is to simply comply with the highest disclosure standards required and apply that to their operations in all jurisdictions.

Regardless of government regulations, there is a class of investors who evaluate companies based on business human rights ranking, voluntary disclosure, and benchmarking tools developed to incorporate the United Nations Guiding Principles. That means that good performance on these benchmarking tools can facilitate access to this exclusively available capital.

Best practices

As the business human rights landscape continues to evolve, businesses and their lawyers need to manage BHR risks as they do any other legal, regulatory or operational risks.
The CBA Guide contains a section emphasizing best practices to enable lawyers and their clients to decide when business activities or relationships pose too high a risk to human rights or at least require a mitigation strategy.

The fundamentals of BHR compliance derive from corporate governance and risk management practices that are already familiar to business lawyers. Basic components include effective board level oversight, a public commitment to respect human rights, due diligence to “identify, prevent, mitigate and account” for adverse human rights impacts, sufficient training, proper control of business partners’ conduct all along global supply chains, proper disclosures and grievance mechanisms.

Conduct of lawyers

The CBA Guide also includes a section on the duty of lawyers and law firms to avoid causing or contributing to adverse human rights impacts through their own activities. It helps clarify the role of Canadian lawyers in advancing the objectives of the United Nations Guiding Principles in accordance with their professional responsibilities as set out in the Model Code of Professional Conduct established by the Federation of Law Societies of Canada (FLSC Model Code).

Conclusion

Respect for human rights is increasing everywhere around the world and we all have a role to play to ensure continued progress.

The legal landscape of business human rights is in constant evolution. It is critical for businesses to engage with BHR risks. These risks will continue to grow. Managing them is both a legal and strategic imperative for lawyers and their business clients alike. With the help of the CBA Guide, risk management becomes a little bit easier.

Special thanks to Claudia Feldkamp and Josh Scheinert for their tireless leadership on assembling the CBA Guide.

Warren Ragoonanan is the Chair of the International Law Section of the Canadian Bar Association and Tina Parbhakar is the Section’s Past Chair and a member of the Business and Human Rights working group of The Canadian Bar Association (CBA), www.cba.org