The FCA – Transformation to Assertive Supervision
On 5th April this year the Joint Committee on Human Rights published its report into human rights and business issues in the UK. Entitled “Human Rights and Business 2017: Promoting responsibility and ensuring accountability” the report is important reading for business leaders, lawyers, consumers and NGOs alike.
There is much to take from the report, not least of all the criticism of the UK government’s Action Plan on Business and Human Rights, the obstacles preventing victims of human rights abuses committed by business from accessing justice and evidence of serious labour rights abuses taking place in factories in the UK but, perhaps the most important pieces of information to take from the report are the recommendations seeking to increase the tools by which companies actions can be regulated.
Some of the new powers that the report recommends include:
Whilst the above are clearly important perhaps the recommendation with what may be the most serious repercussions for business is the recommendation that the government creates a new criminal offence of failing to prevent human rights abuses. It is proposed that this offence would be along the lines of the relevant provisions of the Bribery Act 2010 and therefore would not only include a defence for companies to demonstrate that they had conducted effective human rights due diligence (as recommended by the UN Guiding Principles) but would also, presumably, have extraterritorial effect and therefore catch the action of companies outside the jurisdiction. To enable the proper enforcement of such an offence the report recommends that “the prosecuting authorities are better trained and resourced in investigating breaches of human rights which are criminalised, including for cross-border crimes” and asks that the Ministry of Justice revisit its consultation on “failure to prevent” offences in respect of corporate crimes other than those that are purely economic, such as the use of child labour. The new offence, the report proposes, would catch those companies which did not comply with a new statutory obligation (also recommended by the report) on all companies, including parent companies, to prevent human rights abuses and which did not put in place effective human rights due diligence both for their subsidiaries and across their whole supply chains.
With an election coming up perhaps it is unlikely that the government are going to announce new, far-reaching obligations on companies but should any of the report’s recommendations be taken up there will be clear implications for corporates who should pay attention and be reactive to developments in this rapidly changing area. This report and the drive to improve corporate behaviour in respect of human rights should be seen as part of the wider agenda of corporate reform that began in earnest after the financial crisis ten years ago and that has found its expression in efforts to improve corporate transparency, for example, through increased reporting obligations. There is no reason, at this stage, to think that this call for reform is going to stop soon.
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