How courts and advocates are shaping legal doctrine on corporate liability and human rights obligations
Author: Marion Cadier, Business and Human Rights Resource Centre, Published on: 11 January 2018
Questions on duties and potential liabilities of corporations continue to be debated and settled in different jurisdictions, the crucial issue at heart being whether victims of abuses are able to seek redress against corporations, especially in the home states of multinational companies.
In October, a UK court allowed Zambian victims’ claims in the Vedanta Resources water pollution case to continue being heard in the UK. The court stated that a parent company’s duty of care could extend to a person affected by the operation of its subsidiary. This ruling represents a breakthrough in ‘piercing the corporate veil’, which is widely recognized to be a key obstacle to accessing remedy.
The recent criminal indictments of former executives of LafargeHolcim in France for alleged complicity in gross human rights violations in Syria, and another report supporting allegations of Shell’s complicity in severe abuses by the Nigerian military in the 90s, also point to advances in the criminal liability of companies or their key personnel. These developments add weight to growing recognition by some scholars of an emerging norm of corporate criminal accountability for international crimes.
A platform highlighting key case law, legislative and policy developments, in particular with regard to parent-company liability and mandatory human rights due diligence, was launched in November.
In the US, the Alien Tort Statute has been an important legal tool for holding corporations accountable for human rights violations committed abroad, thus providing a measure of remedy for victims. For example, settlements in the Wiwa case involving Shell, cases involving Blackwater in Iraq, Unocal in Myanmar, and L-3 in the Abu Ghraib prison in Iraq, have made it possible for victims to receive compensation. The decision in Jesner v. Arab Bank will potentially have crucial implications on corporate liability when it comes to violations of international law abroad. In this case, victims allege that the provision of financial services in the US facilitated terrorist activities in Israel and the Occupied Palestinian Territory.
The case is being decided against the backdrop of significant limitations to liability under the ATS set by the Sosa v. Alvarez Machain and Kiobel v. Royal Dutch Petroleum rulings, and amidst growing concerns that corporations’ increasing powers and freedoms are not matched by corresponding responsibilities, putting the public interest in serious danger. The Supreme Courts’ decision will likely influence pending ATS cases in lower courts, as well as companies’ conduct. Some CSOs have also raised concerns that the ATS risks being “narrowed or coopted as a tool to address vague and charged claims of asserted terrorism(…)”.
During oral arguments, petitioners’ counsel maintained that corporate liability for torts had been largely established. The US government stated that it saw “no categorical bar on corporate liability” under the ATS. The Arab Bank’s lawyer argued that there was “nothing approaching a specific universal obligatory norm under international law that imposes obligations directly on corporations” and therefore that no corporation could be liable under the ATS. According to commentators, the Supreme Court could, as it had done in the Kiobel case, avoid answering the question of corporate liability under the ATS, and dismiss the case on other grounds. The concerns raised by Justicesduring oral arguments give little indication as to what turn the Court will take. A decision is due in spring 2018.
While States are understood to be the primary duty bearers under international law, the argument that corporations should have legal obligations to respect human rights has increasingly been put forward as necessary to strengthen accountability and access to justice for corporate-related human rights abuses. Several states, for example, have established in their Constitutions that non-state actors such as corporations bear direct human rights responsibilities. This is the case in Kenya, whose 2010 Bill of Rights extends to private law and conduct, thereby binding private actors (articles 2(1) and 20(1)). These provisions have been interpreted in the 2013 Amy Kagendo Mate v Prime Bank Limited & Credit Reference Bureau Africa case, in which the High Court dismissed an objection that constitutional rights could not be enforced against private entities and stated that “the jurisprudence that has emerged from this Court is that the Constitution now contemplates both vertical and horizontal application of the Bill of Rights” (paragraph 23).
A similar reasoning was used in the William Musembi & 13 others v Moi Education Centre & 3 others decision, where a private education company was found to have violated constitutional rights. Such developments have been seen as opening additional avenues for remedies for corporate abuse.
Stella Wangechi of the Kenya National Commission on Human Rights said: “The creation of an obligation on private parties, including businesses, to respect human rights, and the widening of standing rules to create more room for public interest litigation are developments that can only be celebrated by those working to further corporate accountability”.
Corporate accountability advocates in Uganda are also increasingly turning to the country’sConstitution as a potential liability tool for corporate-related human rights violations. Article 20(2) provides that the rights and freedoms enshrined in the constitution “shall be respected …by all persons”. In a lawsuit filed in the High Court of Uganda against China Communication Construction Company (CCCC) in May 2017, employees who claim they were fired for being HIV positive alleged the company had violated constitutionally protected rights.
The issues of corporate liability and obligations were also discussed at the end of October 2017 during the third session of the UN intergovernmental working group (IGWG) tasked with drafting a binding treaty on human rights, transnational corporations (TNCs) and other business enterprises (OBEs). The elements for the draft international instrument issued by the Chair suggest that states should adopt legislative or other measures to “regulate the legal liability of TNCs and OBEs in administrative, civil and criminal fields”. The elements also contain a section on “general obligations” and suggest that coupling the strengthening of states’ primary responsibility to protect with the recognition of direct obligations for TNCs and OBEs would be key to allow for the prevention and redress of corporate-related human rights violations.
During the IGWG’s third session, delegations welcomed the inclusion of recommendations on legal liability in the elements for the draft international instrument, and some appreciated the flexibility regarding the adoption of measures at the national level given existing differences in legal systems. Several states raised concerns in relation to the imposition of obligations on corporations, while others referenced other treaties in the fields of international environmental and investment law already imposing such obligations. The International Organization of Employers disagreed with the proposal to impose international obligations on companies, highlighting the implications of delegating states’ duty to the private sector. The vast majority of civil society organisations present repeatedly called for the future binding instrument to include robust measures to strengthen corporate liability, and continued to argue that an international treaty is necessary to end corporate impunity.
While obstacles to corporate legal accountability for human rights abuses remain numerous and complex, norms and legal doctrines on corporate liability and human rights obligations continue to evolve at the national and international levels. As demonstrated by major events, reports andrankings this year, access to remedy for corporate abuse remains a priority area in the business and human rights field.
Related companies: Arab Bank Blackwater China Communications Construction Company Limited (CCCC) L-3 Communications LafargeHolcim Nevsun Shell Tahoe Resources Unocal (part of Chevron) Vedanta Resources