Commentary: No Need to Reinvent Wheels - Drafting Meaningful Human Rights Due Diligence through Model Suggested Supply Chain Contract Clauses
March 2021
[I]n March of 2021, a Working Group of the ABA Business Law Section published its MODEL CONTRACT CLAUSES TO PROTECT WORKERS IN INTERNATIONAL SUPPLY CHAINS (Model Clauses). This version offers contract lawyers the opportunity to use contract language that would explicitly operationalize human rights due diligence in supply chain contracts, in order to make clear that abuses of workers’ rights occurring in global supply chains is a shared responsibility of buyers and suppliers.
The traditional approach of buyers’ legal counsel towards the problem of human rights issues in business supply chains has often been to shift most responsibility to suppliers. This resulted in the creation of supply chain contracts that require suppliers to meet prescribed human rights standards.., breach of which could entitle the buyer to the full range of contract remedies.., whether or not the buyer’s own decisions or actions contributed to the breach.
This is sometimes referred to as a “top-down compliance” approach because it is based on representations and warranties of performance that the supplier must adhere to in the contract. However, this approach is in tension with human rights due diligence under the UNGPs...
Not only is such an approach problematic under the UNGPs, but substantial RESEARCH has shown that it is not effective to improve supply chain human rights performance...
The Model Clauses seek to address this problem by shifting from a top-down compliance approach to a human rights due diligence approach. A key driver for the changed draft is the need to prepare lawyers to be able to align their clients’ contracts with the likely enactment of mandatory human rights due diligence legislation in the EU, which will affect US companies that do business in the EU.
The Model Clauses are not intended to be a binding standard. It is suggestive only, and does not constitute legal advice. It is not official ABA policy. Rather, it is aimed at buyers who truly want to align their supply chain contracts with the UNGPs, but don’t yet know quite how to do so. As opposed to reinventing the wheel, the Model Clauses provide a suggested model for doing so...
The Model Clauses incorporate changes in two key areas, which I discuss below:
- Moving to a Human Rights Due Diligence Regime...
- Shared Responsibility to Understand and Remedy Human Rights Impacts...