Interplay between Business and Human Rights

Human rights is increasingly occupying an important position with respect to a good corporate life, performance indicator and social responsibility. In the last decade, there has been an increased focus on the ramifications of the actions of business entities on individuals, communities and the environment.

However, despite the increasing discourse on the impact of business on human rights, effective attempts to check human rights violations in the supply chains and activities of corporations have remained limited. There continues to exist a gap between the policies being framed on business and human rights and its effective practical implementation. The cause for the same can be attributed to the lack of the political will, in some States, to strictly regulate human rights violations by business entities.

This lack of political backing to a binding business and human rights framework, particularly in developing countries, is largely a result of the economic considerations of the States, and their inclination to incentivise foreign investments in their territory by providing lenient investor obligations, labour markets and regulatory frameworks.

Let us analyse some recent developments on business and human rights, with particular reference to the Indian scenario.

Developments in Law

As against the traditional understanding that business and human rights are unconnected aspects of law and practice, in recent times, international community has growingly become aware of the impact of the actions of business entities on enjoyment of human rights. In 2011, the United Nations Guiding Principles of Business and Human Rights (UNGPs) acknowledged the duty and responsibility of States and corporations, to respect and protect human rights.[1] The principles articulated by the UNGPs stand as its three pillars: (i) State duty to protect; (ii) corporate responsibility to respect; and (iii) access to remedy.

The UN Working Group on Business and Human Rights had urged all States to develop a national action plan on business and human rights, such that they can effectively implement the UNGPs in their territories. For the same, the Working Group developed a “guidance note,” which stipulated four criteria for developing the national action plans: (i) the plan must based upon the UNGPs; (ii) it must reflect the State’s actual and potential business related human rights abuses; (iii) it must be inclusive and transparent; and (iv) it must be regularly reviewed and updated. Several States have already formulated their national action plans to implement the UNGPs in their respective States.

While India announced in 2018 that it will be formulating a National Action Plan on Business and Human Rights, the same is still to be finalised and released. The Ministry of Corporate Affairs, which is steering the process of formulating the National Action Plan, was undertaking consultations and accepting comments from stakeholders till March 2020, and the document must be in its final stage now.[2]

The National Action Plan will be expected to target several issues that are prevalent in India, such as dispossession and rehabilitation of communities, child labour, bonded labour, health and safety of workers, favourable working conditions, social protections, among others. Importantly, the most problematic issue with respect to regulating activities of businesses in India is that around 90 per cent of the labour works in the informal sector.[3] Employers of informal labourers are often aloof of voluntary commitments to corporate social responsibility.

Therefore, for the policies to be effectively put into practice, they must be devised in a manner to bring the informal labourers under the ambit of its protection. Unless the same is done, the policies framed by the State will effectively only be protecting 10 per cent of the workforce in India. It is also very important for the National Action Plan to emphasise on the need to ensure access to remedies to all the victims of business-related human rights violations.

Incidentally, in 2019, the Ministry of Corporate Affairs had revised the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, 2011 (NVGs) and formulated the National Guidelines on Responsible Business Conduct (Ngrbc). The revision of the guidelines was made with the intention to urge businesses to actualise the UNGPs in letter and spirit.[4] However, all these guidelines only provide for voluntary commitments, and unless the same is replaced with mandatory compliance requirements, it will continue to serve mere lip service, without bringing about any effective change. An effective business and human rights framework will require accountability and enforceability of the principles enshrined in the UNGPs.

The United Nations Human Rights Council (Unhrc), in another move to regulate business and human rights, has also been attempting to devise a legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises.[5] State parties to the instrument will be required to regulate effectively the activities of all business enterprises domiciled within their territory or jurisdiction, including those of a transnational character. This would include ensuring that business, in its territory, undertake human rights due diligence, respect all internationally recognised human rights and prevent and mitigate human rights abuses throughout their operations.

Another development is the Hague Rules on Business and Human Rights Arbitration, which was also formulated recently with the objective of imparting a set of rules for arbitration in relation to business and human rights disputes.[6] The intention of the Hague rules is to subscribe to the application of the third pillar of the UNGPs which secures the access to remedy. It will be interesting how States and corporations respond to these developments in the coming years.

Position in Bilateral Investment Treaty Framework

The lack of political will on part of the States to regulate human rights compliances of corporations can be understood from the fact that traditionally investment treaties have failed to impose any obligation upon the investors, with respect to environment protection, labour and human rights. Moreover, while some recent treaties do have provisions relating to investor compliances/obligations, they merely call for a bona fide commitment to corporate social responsibility standards, without providing any enforceability of the compliances. The Indian Model Bilateral Investment Treaty (BIT), 2015 can be a good example for the same. Article 12 of the Model BIT reads as:

“Investors and their enterprises operating within its territory of each party shall endeavour to voluntarily incorporate internationally recognised standards of corporate social responsibility in their practices and internal policies, such as statements of principle that have been endorsed or are supported by the parties. These principles may address issues such as labour, the environment, human rights, community relations and anti-corruption.”

Therefore, as evident, the Indian Model BIT only calls for a voluntary endeavour to respect human rights, and does not stipulate a binding obligation to that regard. To put the same in context, a comparison can be drawn to the more efficient investor obligations that can be found in the Southern African Development Community (SADC) Model BIT, 2012. The SADC Model BIT stipulates, in concrete terms, that the investors and/or investments are mandatorily required to respect the international environmental, labour and human rights obligations binding on the host State.

As it is becoming increasingly evident that transnational businesses can have a major impact on environment and human rights in the host State, States should negotiate treaties that are more balanced between the States and investors, and provide for investor compliances as jurisdictional prerequisites in investment treaties.

Impact of Covid-19 Pandemic

The pandemic, as we know, has caused major economic disruptions and destabilised the global economy. At its peak, extended travel limitations and broken supply chains had led to significant drop in the prospects of several business entities and corporations. Compromised supply chains and economic losses, as a chain reaction, caused several corporations resort to harsh measures to keep themselves afloat, such as discriminate laying off of workers, altering of working cultures and cutting on due diligence cost.[7]

The UN Working Group on Business and Human Rights, in its statement on the ramifications of the pandemic, had acknowledged that the actions of corporations are, directly or indirectly, affecting the rights of their employees, contract workers and individuals involved in their supply chains.[8] The pandemic brought to light the issues pertaining to the right to health, equality, livelihood, safety and favourable conditions to work of the workers.[9] While States undertook several relief measures,[10] and urged corporations to continue to provide safety and recourses on a non-discriminatory basis, the lack of adequate protection against violations of labour and human rights was manifest.

As States embark on economic recovery, it is imperative that they strike an equilibrium between safeguarding health, reducing economic and social disruption, and respecting human rights. As a response to the pandemic, efforts must be taken to impose stricter guidelines on human rights impact assessments, grievance mechanisms, and other due diligence obligations of corporations, such that the three pillars of the UNGP can be effectively reinforced. Particularly, the temptations to resort to lenient labour regulations and investor compliances, to aid, economic recovery and incentives investments must be resisted. For instance, the ordinances passed to suspend certain labour laws for a period of next three years, in several Indian States, was heavily criticised by human rights activists as being a clear departure from India’s commitment to the UNGP.[11] Developing countries are particularly susceptible to such a trend, and if not checked, it might limit progress on business and human rights regulations.

Conclusion

It is the duty of businesses to conduct human rights due diligence within their supply chains and operations. To ensure that the business effectively perform their duties, the States must provide adequate regulations and check mechanisms. Therefore, both States and corporations must cooperate and ensure a healthy corporate environment in the country, which is respectful of the internationally accepted human rights and UNGPs. In conclusion, it can be said that the increasing discourse on business and human rights is a positive sign, only time will tell if the same is effectively put in practice.


Bhumesh Verma is Managing Partner at Corp Comm Legal and can be contacted at bhumesh.verma@corpcommlegal.in. Abhishar Vidyarthi, Student Researcher and can be contacted at avividyarthi@gmail.com.

[1]United Nations Guiding Principles on Business and Human Rights, 2011, <https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf>.

[2] National Action Plan, <https://www.mca.gov.in/Ministry/pdf/NationalPlanBusinessHumanRight
_13022019.pdf
>.

[3]Employment in Informal Sector and Conditions of Informal Employment, 2013, <https:// labour.gov.in/ sites/default/files/Report%20vol%204%20final.pdf>.

[4]National Guidelines on Responsible Business Conduct, 2019, <https://www.mca.gov.in/ Ministry/pdf/NationalGuildeline_15032019.pdf>.

[5]Legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises, 2020, <https://www.ohchr.org/Documents/HRBodies/HRCouncil/WGTransCorp/Session6/OEIGWG_Chair-Rapporteur_second_revised_draft_LBI_on_TNCs_and_OBEs_with_respect_to_Human_Rights.pdf>.

[6] Hague Rules on Business and Human Rights Arbitration, 2019, <https://www.cilc.nl/project/the-hague-rules-on-business-and-human-rights-arbitration/>.

[7] Howard Levitt, Some employers may be using pandemic as excuse to fire employees protected by human rights codes, Financial Post (21-4-2020), <https://financialpost.com/executive/careers/some-employers-may-be-using-pandemic-as-excuse-to-fire-employees-protected-by-human-rights-codes>.

[8] Statement by the UN Working Group on Business and Human Rights, <https://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=25837&LangID=E>.

[9]      Respecting Human Rights in the time of the Covid-19 Pandemic, 16-4-2020, <https://www.ihrb.org/focus-areas/covid-19/report-respecting-human-rights-in-the-time-of-covid19>.

[10] Measures, such as stimulus packages, tax reliefs, wage subsidies, etc., were undertaken in order to safeguard businesses, and thereby, restrict the hardships from trickling down to the workers. One of the best examples of the same can be seen in the form of Canada Emergency Wage Subsidy, wherein, to protect the Canadian workforce, the eligible businesses were provided up to 75 per cent of employer salaries; Jamie Golombek, Wage subsidy programs for employers: Canada’s Covid-19 response plan, <https://www.cibc.com/content/dam/personal_banking/advice_centre/tax-savings/covid-wage-subsidy-en.pdf/>. Similarly, corporations were urged to continue to provide access to accurate informations, paid sick/preventive leaves, payments to hourly waged staff, emergency supplies on a non-discriminative basis, etc.

[11]Ashima Obhan and Bambi Bhalla, Suspension of Labour Laws Amidst Covid-19, <https://www.mondaq.com/india/employment-and-workforce-wellbeing/935398/suspension-of-labour-laws-amidst-covid-19>.

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