Business and Human Rights Legislation and the Enforcement Question - A report by Kingsley Napley and Dr Rachel Chambers

29 January 2021

Globally, a trend is taking shape towards legislation that asks more from businesses than the reporting obligations of the UK’s Modern Slavery Act, in the area of business and human rights. The EU is consulting currently around the contours of a proposed mandatory due diligence human rights law to be enacted this year. These proposals are similar to the kinds that were passed in France in 2017 and only very narrowly defeated in a 2020 Swiss referendum. Calls for the UK to follow suit are mounting, and will in due course be difficult to ignore, given the global direction of travel in business and human rights regulation.


How could a compulsory UK human rights due diligence law improve the enforcement and legal landscape for victims of cross-border human rights abuses? And what support and powers would a regulator need to be effective? These questions were asked by a group of inspirational UK civil society organisations – led by the Traidcraft Exchange – in 2020. They commissioned research on the topic, conducted during the summer 2020 by Dr Rachel Chambers, at the Human Rights Institute, University of Connecticut, and Katherine Tyler and Sophie Kemp, Partners at Kingsley Napley.

The full paper is available here. A lively seminar about the report held with the Bonavero Institute of Human Rights is also available here. In this blog, we summarise the key findings of the paper. 

A proposed UK human rights due diligence law

The UK human rights due diligence law could impose the following duties on subjected organisations (broadly):

  1. To prevent adverse human rights and environmental impacts of their domestic and international operations, including in their supply and value chains.
  2. To develop and implement appropriate due diligence procedures to prevent such impacts.
  3. To publish a forward-looking plan on future procedures to be adopted, and an assessment of the effectiveness past procedures.

The report also proposes liability for organisations that fail to meet these duties to give the duties ‘teeth’ and a gamut of penalties. This would be a civil penalty if organisations fail to meet the due diligence duties. If organisations fail to prevent adverse human rights and environmental impacts from their operations, they would be liable for related harm and loss enforceable both through regulatory civil penalties and civil litigation. It would be a defence for organisations to prove that they acted with due care to prevent human rights and environmental impacts. Organisations and their senior managers would be criminally liable if they failed to prevent serious human rights or environmental impacts.

What are the issues with civil or criminal liability in corporate accountability cases currently?

There are serious obstacles for victims seeking redress through civil or criminal law in the English courts currently, for human rights violations committed abroad. The report focuses on the situation for extraterritorial, not domestic, human rights abuses.

In civil law, the issues are shown well by a string of international class action cases brought under tort law in the English courts. These are brought by affected citizens, mostly of developing countries, for the harmful actions or omissions of overseas subsidiaries that have a UK-based parent company. Two of such cases - Lungowe v Vedanta Resources plc and Okpabi v Royal Dutch Shell (Kingsley Napley acted in the latter for human rights interveners) – have been heard in the UK Supreme Court since 2019. The claimants in these cases are in Zambia and Nigeria respectively but their issues in taking the trial to the UK are shared. Companies take steps to distance themselves from the operations of their subsidiaries abroad to avoid liability; it is hard for claimants to prove that the UK parent company was sufficiently involved. To show that the trial should be heard in the UK, the claimants have to show sufficient involvement from the UK parent. But this is before they have the right to full disclosure, which leads to a Kafkaesque situation where the claimants plead their case without seeing all relevant evidence. The cost of gathering evidence overseas, and funding the litigation, is prohibitive for claimants and law firms. Civil liability through tort litigation is not well-suited to cases where the business in question contributes a small proportion to an extraordinary harm, e.g. companies contributing to climate change.

In criminal law, no company has been prosecuted in the UK courts for serious human rights impacts or environmental harm abroad. The issues with the ‘identification principle’ for prosecuting corporate conduct are well documented; this requires prosecutors to show that someone who was the ‘directing will and mind’ of the company had the necessary mens rea. The complex corporate structures of modern-day businesses make it difficult for prosecutors to establish a specific individual as the company’s ‘directing will and mind’. Where corporate decision-making is diluted across boards and committees, as it is routinely, the test is harder to make out. UK courts also have jurisdiction only for crimes committed in the UK save for very limited exceptions. Significant prosecutorial appetite is needed to find the political will to take on large corporates, fund a complex cross-border investigation and overcome risk of failure. This puts aside the very difficult practical issues with evidence-gathering in a large cross-border criminal investigation. Lastly, the criminal process is not designed to remedy the victims of complex harm or loss, but to punish the culpable conduct of wrongdoers.

 

Should we still look at options for criminal liability?

So, it is clear that both civil and criminal liability pose issues in corporate accountability cases. However, the report finds that criminal prosecutions for a new criminal offence could be an important tool. This new offence would be ‘failing to prevent serious human rights violations’ – following the model of the offences of failure to prevent bribery (the Bribery Act 2010) and failure to prevent tax evasion (the Criminal Finances Act 2017). The attraction of the ‘failure to prevent’ model is that it dispenses with the problems of the ‘directing will and mind’ test. It puts strict liability on companies, save for a defence of ‘taking due care to prevent human rights abuses’.

There would be important aspects to consider when developing the new criminal offence. A necessary limitation would be that the underlying conduct itself (the serious human rights abuses) must be criminal (following the bribery and tax evasion models). The level of nexus with the UK needed for the prosecutor to take jurisdiction would also be important. Under the Bribery Act defendant corporates need only “carry on” business in the UK to be caught by the statute, but that is not without its issues. Care would also be needed around the new offence’s interaction with the complex legal regime on corporate environmental harm in the UK, currently involving a number of regulators and prosecutors.

 

What would the key features of the business and human rights regulator look like?

The key focus of the report, which caused lively questioning in the Bonavero Institute seminar, considers what an ambitious and innovative regulator would look like, that properly policed corporates for extraterritorial human rights and environmental abuses.

Like the Health and Safety Executive, Environment Agency and Equality and Human Rights Commission, the regulator would reach across sectors. It would range from regulating businesses with high levels of corporate responsibility to those who turn to bad practice neglectfully or wilfully. It should have a high level of independence from the executive to be as free as possible from political interference. It should work closely with regulated entities in order to build their capacity – including by issuing guidance and best practice guides.

Enforcement

The enforcement mechanism would be fundamental to the regulator’s proper working. A key criticism of the Modern Slavery Act is the lack of ‘teeth’; as such, business and human rights regulation has not yet got off the ground in the UK.

As a first step, it is crucial that the new regulator is empowered to act upon information from any source, including members of the public, victims, civil society organisations, the police or other regulators, corporates and their employees. This would empower those who are afraid to speak up or do not know how to. If the regulator then considers there is a ‘case to answer’, it should investigate. It should have the broad range of investigatory powers available, including powers of seizure and to issue production orders, seeking help from foreign investigators through mutual legal assistance where necessary.

A bold consideration for the new regulator would be a ‘market investigation’ power. The CMA in the UK possesses this power which enables it to conduct an in-depth investigation of an entire market sector which does not appear to it to work satisfactorily. Such investigations focus on industry-wide behaviours and practices, rather than the workings of individual companies. Significant remedies are available to the CMA, including structural remedies (eg the forced sale of certain parts of companies), behavioural remedies (eg price controls), or measures to improve customer information, as well as the power to make recommendations to government. The effectiveness of this tool in competition law has led the European Commission to consider very recently an EU version of the mechanism.

This could be an essential tool for the new regulator. Human rights abuses often become endemic in particular sectors, with a myriad of practices by ranging actors contributing to widespread abuse. The equivalent of a market investigation tool has the potential to gain an in-depth understanding of how human rights abuses are perpetuated in sectors and opens the door to targeted remedies. A benefit of the CMA’s model for market investigation is that it does not cut across the right of claimants to seek compensation in civil law. Rather, it complements this and empowers claimants. Following a ‘market investigation’, legislation could allow the new regulator to make infringement findings which are admissible in civil claims, facilitating ‘follow on damages’ claims like in competition law; this would substantially reduce the fact-finding burden on claimants. For example, the regulator could initiate ‘market investigations’ into the mining/extractive, oil and garment industries after credible complaints. Deep and careful investigation from regulators could lead to regulatory action, but also findings that help claimants to gain compensation for human rights and environmental abuse.

 

Conclusion

The report explores the vital but under-researched question of enforcement of mandatory HRDD laws, focusing on the UK. It demonstrates that although UK companies are rarely held accountable for cross-border human rights abuses, the situation need not be this way. An ambitious and dedicated regulator with strong powers could add real value to the enforcement of the proposed human rights due diligence law. Borrowing from the competition law regime – by empowering the regulator with ‘market investigation’ powers which facilitate civil follow-on damages claims – could be a significant consideration. Through heightened awareness and campaigning from civil society, the public and responsible corporates, the system of corporate accountability for extraterritorial environmental and human rights harms could be much improved in due course.

Further information

For further information on any issues raised in this blog post, please contact a member of our Business and Human Rights team.

 

About the author

Nick De Mulder is an Associate in Kingsley Napley’s Public Law team advising on public law, information law and business and human rights. He acts for a range of clients at Kingsley Napley including individuals, charities, public bodies and businesses. He represented international human rights NGOs, the Corporate Responsibility (CORE) Coalition and International Commission of Jurists, on their Supreme Court intervention in Okpabi v Shell; a class action concerning oil pollution in the Niger Delta where thousands of claimants seek redress in the English courts.

 

Latest blogs & news

Case Note - amenability to judicial review challenge: R (Taggart) v The Royal College of Surgeons [2022] EWHC 1141 (Admin)

The Administrative Court of England and Wales has recently considered whether the Royal College of Surgeons (RCS), when producing a report, under the ‘Invited Review Mechanism’ (IRM), could be challenged by way of judicial review.  The judgment of Mrs Justice Hill provides a helpful review of the relevant authorities and illustrates the limits of the judicial review jurisdiction – she concluded that a challenge could not be made.

The ICO’s Enforcement of the PECRs – what powers are at its disposal?

Complaining about a PECR breach to the ICO, especially about an unwanted marketing communication, is quick and easy for the affected person. Meanwhile for an organisation at the sharp end of a complaint, the PECRs enforcement regime is not straightforward to untangle. In this blog, we outline the ICO’s specific enforcement regime when investigating breaches of the PECRs.

The (Long) Covid Inquiry – the challenge of complying with Article 2 in timing the Covid Inquiry

The UK Covid-19 Inquiry has published its long awaited draft terms of reference, and a consultation on those proposed terms. The final terms of reference are of considerable importance to those taking an interest in the Inquiry, as set out here by Stephen Parkinson

Case Note: challenging consultations in judicial review proceedings - R (oao Binder and others) v Secretary of State for Work and Pensions [2022] EWHC 105 (Admin)

The Administrative Court has recently upheld a challenge to a ‘consultation’ undertaken by the Department for Work and Pensions (DWP) prior to the publication of the National Disability Strategy. Strikingly the DWP gave evidence that it had not been intending to carry out a consultation – but Mr Justice Griffiths held that, as a matter of substance (as opposed to intention), there had in fact been a consultation; and that, (unsurprisingly as it was not a standard that it thought it had to meet) the DWP had failed to meet the legal requirements for a fair and adequate consultation.

 

The Covid-19 Inquiry: the Consultation on the Terms of Reference

In December 2021, the Prime Minister appointed Baroness Heather Hallett DBE as Chair of a statutory public inquiry into the handling of the Covid-19 pandemic across the UK. The announcement concerning the inquiry stated that there would be a public consultation on the draft terms of reference. This blog discusses the likely approach and scope of that consultation.

Data Protection reform: A new direction for charities?

Following the UK’s departure from the EU, the Government wishes to reform the data protection legislation within this country in order to ‘unlock the power of data.’ For charities, does this mean the painful prospect of reworking their existing GDPR compliance regime or the promise of a lighter regulatory load?

Why Companies with Supply Chains in Xinjiang and China Need to Act Now

It’s a year since the UK Government announced business measures over human rights abuses in the Xinjiang province of China. In this piece we reflect on those measures and what might come next. We also look at what action prudent businesses should take now if they are concerned about products from Xinjiang in their supply chain, or how products they export to China are being used.

Data: A New Direction - Research, Re-use and Responsibility

High on the Government’s wish list for data protection reform is the reduction of legislative barriers to ‘responsible innovation,’ particularly within the field of scientific research. Due to perceived complexity and lack of clarity, it is feared that organisations either choose not to conduct research at all or rely on unnecessarily burdensome consent processes. This blog considers the likely impact of the Government’s ideas

Consultation on ICO Powers Shows the Breadth of the Regulator’s Powers

On 20 December 2021 the ICO launched a consultation seeking views on three documents, which together demonstrate its wide-ranging powers to undertake investigatory, regulatory and enforcement action.  

The Terms of Reference for the Scottish Covid-19 Inquiry

As we await the publication of the terms of reference for the UK wide Covid-19 Inquiry, in this blog I consider the key features of the recently published terms of reference for the Scottish Inquiry into the Covid-19 pandemic.

The Covid-19 Inquiry – the importance of the terms of reference

Any day now the Covid-19 Inquiry will publish draft terms of reference. This will be a significant event.  Once agreed, the terms of reference will determine the scope and length of the inquiry which is due to begin its work in the Spring.  In turn this will have a direct impact on how valuable the inquiry turns out to be.  

Data: A new direction - Access to personal data

In this blog series, we will review the key proposals for reform of data protection law within the Government’s consultation paper ‘Data: A New Direction’. We will consider how far the Government will stray from the current path and signpost some potential pitfalls and practicalities for consideration along the way

The right to equality in fertility treatment

A same-sex couple have commenced a significant test case against a branch of the NHS fertility sector for discrimination against them on grounds of their sexuality. 

Court considers that intransigent public inquiry witnesses will often give evidence once they have been compelled to attend

In a 16 November 2021 blog, I described how refusing to give evidence to a public inquiry might play out. Another new case, Chairman of the Manchester Arena Inquiry v Romdhan [2021] EWHC 3274 (Admin), reinforces my view. Potential witnesses in next year’s coronavirus (Covid-19) inquiry take note.

 

Data: A New Direction - Unleashing the transformational power AI?

In this blog series, we will review the key proposals for reform of data protection law within the Government’s consultation paper ‘Data: A New Direction’. We will consider how far the Government will stray from the current path and signpost some potential pitfalls and practicalities for consideration along the way.

The Judicial Review and Courts Bill: Proposed reform of Judicial Review

Attempts to narrow the scope of judicial review have long been on the Conservative Party’s political agenda. Following the Independent Review of Administrative Law (‘IRAL’) and the subsequent government consultation on reform of judicial review, the then Lord Chancellor, Robert Buckland, introduced the Judicial Review and Courts Bill (‘the Bill’) to the House of Commons on 21 July 2021. The Bill is making its way through Parliament and is currently at the committee stage.

As we highlighted in our earlier blog following the Bill’s announcement, the proposed reforms are, at first sight, milder than had been feared. Nevertheless, the Bill proposes to make significant amendments to the remedies available in judicial review proceedings and to also limit the court’s jurisdiction.

Data protection law reform: A new direction?

In this blog series, we will review the key proposals for reform of data protection law within the Government’s consultation paper ‘Data: A New Direction’. We will consider how far the Government will stray from the current path and signpost some potential pitfalls and practicalities for consideration along the way.

We begin with the Government’s proposals for creating a ‘whitelist’ of legitimate interests which always provide a lawful basis for processing under the UK GDPR. 

Can you refuse to give evidence to a public inquiry?

Individuals asked to give evidence to public inquiries often wonder whether they really have a choice. The case of Chairman of the Manchester Arena Inquiry v Taghdi [2021] EWHC 2878 (Admin) illustrates how refusing to participate might play out. Potential witnesses in next year’s coronavirus (Covid-19) inquiry take note.

Having our cake and eating it: Parliamentary sovereignty in light of Brexit and the Covid-19 pandemic

One of the key themes of the Brexit campaign was for the UK to retain Parliamentary sovereignty, or “Take Back Control.” This blog focuses on that aspect of Brexit and revisits previous discussions around delegated legislation and Parliamentary sovereignty to assess the effect of the past 9 months on our Parliament.

Reform of the Human Rights Act: The Lord Chancellor’s “mechanism” to correct judgements

At the recent Conservative party conference, the new Lord Chancellor, Dominic Raab, signalled his intention to “overhaul” the Human Rights Act 1998 (the ‘Act’). It has since been reported that he is working on a “mechanism” to allow the Government to introduce ad hoc legislation to correct court judgements that ministers believe to be incorrect. Whilst the precise details of any mechanism remain to be seen, this notion is constitutionally problematic in that it potentially grants the executive wide powers to override the judiciary.

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Skip to content Home About Us Insights Services Contact Accessibility