Human rights obligations for the private sector

By Harry Aitken | 14 Oct 15

The international human rights regime was originally designed to protect individuals against the exercise of power by states. Yet, with global developments like the privatisation of government and the internationalisation of supply chains, the rights of individuals are increasingly at risk from an altogether different actor – the private company.

Since the industrial revolution and the birth of limited liability, the growth of the company has been exponential. We now live in a time where companies can outmatch countries on both a revenue-to-GDP and employee-to-population basis. Walmart’s revenues match the GDP of the 25th largest economy and McDonalds’ employee numbers surpass the populations of 106 countries.

The size and wealth of companies mean they are able to exercise tremendous power and control over the lives of their employees, stakeholders and other parties that fall within their sphere of influence. In many instances, this power is deployed for good. Take, for example, the Australian Government’s announcement in June of this year that it would use the supply chains of firms like Coca-Cola to deliver medical aid.

But private power, like public power, is susceptible to abuse. A recent and well-publicised example is the human rights abuses allegedly perpetrated by Wilson Security in immigration detention centres it runs on Nauru. In August this year, whistleblower John Nichols alleged that contractors engaged in waterboarding and “zipping” – a practice where a detainee is tied to a bed frame, which is then dropped from a height with the person still attached.

“The misuse of power by private companies demands a regulatory response
from governments at both the domestic and international level.”

Other well-publicised examples of human rights abuses by companies include the labour-rights abuses allegedly occurring in Apple’s supply chains in Asia, including children mining for tin ore in dangerous conditions in Indonesia, and armed conflict allegedly fuelled by Royal Dutch Shell in the Niger Delta.

The misuse of power by private companies demands a regulatory response from governments at both the domestic and international level. In particular, companies must be subject to binding human rights obligations and face sanctions for non-compliance. But as well as using the “stick”, governments need to provide the “carrot” to encourage the private sector to develop preventative measures top-down.

At the international level, the most promising legislative development has been the release of the UN Guiding Principles on Human Rights (Guiding Principles) in 2011. The Guiding Principles implement a “protect, respect and remedy” framework, which requires that governments protect against rights abuses, that companies respect rights, and that individuals be granted a remedy where rights are violated. The Guiding Principles are not currently binding under international law, but if the principles are widely adopted, some or all of the rules may develop into what is known as customary international law.

One of the most innovative and practical concepts contained in the Guiding Principles is “human rights due diligence” (HRDD). HRDD is the process that a business uses to become aware of and manage its actual and potential impacts on individuals’ rights. The strength of HRDD is that it is a preventative tool that can be readily inserted into companies’ pre-existing risk and compliance programs.

This and other mechanisms have seen the emergence of a new species of advisory firms, which assist companies to become human rights compliant. Shift is a New York-based NGO that aids companies to implement the Guiding Principles and, in Australia, KPMG recently acquired human rights consultancy firm, Banarra. The International Finance Corporation has also published a guide for companies on human rights impact and assessment.

The Guiding Principles are now reflected in the OECD Guidelines for Multinational Enterprises. While the OECD Guidelines are not legally binding they provide for a complaints mechanism through National Contact Points (NCPs). NCPs are government bodies empowered to mediate between parties, conduct examinations and issue findings. Companies that are being investigated have the opportunity to settle with the complainant by agreement during the process of investigation. Given cooperation would likely influence the nature and tenor of the NCPs’ final report, there exists significant incentive for companies to come to the table. A negative finding by an NCP is bound to cause significant embarrassment and disrepute for the company in question. The findings of the Australian NCP are published online and can be accessed here.

The Guiding Principles and the OECD Guidelines are promising developments. Nevertheless, the idea that companies should have human rights obligations is new and there exists only a fledgling regulatory framework in this area. While the growth of advisory firms shows that some companies are taking the issue seriously, government leadership is required to engender widespread compliance across the private sector.

A good first step would be for governments to implement rules protecting individuals against rights abuses by companies, in accordance with the Guiding Principles. This would have a cascading effect, requiring companies to adhere to the “respect” and “remedy” pillars contained in the principles.

Harry Aitken is lawyer practising in commercial litigation in Melbourne. He is also Editor-in-chief of the blog of the International Law Association (Australia),

Feature image: Andy/Flickr