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Business and Human Rights

Businesses are important to communities. They can provide investment, jobs and much needed services. But business does not always benefit people. Sometimes businesses harm people, communities and the environment.

If a business harms your human rights, there are options for you to enforce your rights. You could take a case to court or try to negotiate a resolution to find a solution.

There are difficulties in obtaining a remedy for business human rights abuses.

  • In many countries, businesses don’t have a general legal duty not to harm human rights and there may be no national law you can rely on to challenge the harmful activities;
  • The business may be based in a different country meaning you may need to ask a foreign court or organisation to look into your case; and
  • There may be financial and personal risks in challenging powerful corporate and government actors.

But there are ways to overcome these barriers and hold businesses accountable if they abuse your human rights, take your land or pollute your environment.

This Guide outlines tools and mechanisms you can use to seek a remedy for corporate human rights abuses and to protect your human rights if they are threatened or harmed by business activity.

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What Are Human Rights?

Human rights are the rights and freedoms held by every human being without discrimination. Human rights protect our basic needs and freedoms.

Human rights include rights like:

  • The Right to Life
  • The Right to Food
  • Freedom from Slavery
  • The Right to Work

 

a) Human rights instruments

Human rights are protected in various international human rights instruments which create legal obligations for states to do things and stop doing things in order to respect, protect and fulfil your human rights.

  • If a state fails to act in such a way, the state is said to violate international human rights law.

The main international human rights instruments include:

  • Customary international law
    • These are principles of state behaviour accepted as binding principles of law because they reflect widespread state practice (e.g. the prohibition of slavery, torture and racial discrimination)
  • Human rights treaties, such as:
    • International Covenant on Civil and Political Rights
    • International Covenant on Economic Social and Cultural Rights
    • If a state signs and ratifies these treaties, they become “binding” on your state at international law. You can check whether your country has signed and ratified a UN Human Rights Treaty here.
  • Non-binding human rights instruments, such as:
    • The Universal Declaration of Human Rights
    • The UN Guiding Principles on Business and Human Rights
    • These don’t create immediate legal obligations but can influence how other laws are enforced.

You can find a full list of international human rights instruments here.

 

b) Human rights obligations

States bear the primary obligation to ensure human rights are guaranteed. In some countries, international human rights norms become part of national law as soon as the state ratifies the relevant human rights treaty. In other countries, the state will need to reform national law to “internalise” its human rights commitments.

Your human rights may be set out in your country’s constitution or public laws to create legally binding obligations for the state.

  • These are legally enforceable protections for you.
  • You can enforce these against the state in national courts.

As part of their human rights obligations, states must pass laws to protect human rights. This means ensuring businesses or other people do not harm your rights.

  • Your human rights may then be protected indirectly through other national laws e.g. tort law and criminal law (see “Do Businesses Have Human Rights Responsibilities?”) to create legal obligations for “private” non-state actors.
  • These laws can apply directly to businesses; for example, a legal obligation to prevent discrimination at work, to consult with local communities, and not to pollute.

Although businesses don’t have human rights obligations under international law, they do have a responsibility to respect human rights. The responsibility to respect human rights is the standard of conduct expected of businesses not to harm human rights. This will be covered in more detail in “Do Businesses Have Human Rights Responsibilities?

Key Terms
States have legal obligations under international human rights law.

The term “human rights violations” can be used where a state does not fulfil or violates these obligations.

Businesses do not have legal obligations under international human rights law but they should respect human rights – the “corporate responsibility to respect human rights”.

Negative impacts or human rights harms linked to business activities can be called “corporate human rights abuses”.

Business do have legal obligations under national laws, which may relate to human rights. If a business breaches a provision of national law, it could be legally liable and held accountable.

The term “human rights abuse” is a general term used to refer to human rights harms whether caused by a public or private actor.

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What Are Businesses?

A business can be any organisation that engages in commercial activity (generally activity to make money or a profit). Businesses can take many forms. All businesses can negatively impact human rights.

If you want to take legal action against a business, it’s important to know what type of business is involved. Here are the key types of businesses and features to bear in mind when considering legal action:

 

a) Sole traders and business partnerships

These are small businesses, run or owned by one individual (a sole trader) or a couple of people (a business partnership).

Key features include:

  • The business owners’ unlimited liability (i.e. having a legal responsibility under national law). This means that they will be personally liable in the event of a legal dispute and their personal assets can be taken to pay the business’ debts (e.g. a claim for financial damages).
  • The process for bringing a legal action against these forms of business will vary from country to country but the process is often simpler than when suing a limited company (see “How Can I Bring a Civil Claim Against a Business in National Courts?”).
  • As small businesses, it may be difficult to get a lot of compensation as the business won’t have as much money as a bigger business.

 

b) Private and public limited companies

These are usually big domestic businesses. A public limited company (plc) is a limited liability company that has offered shares to the general public and is listed on a stock exchange.

  • The concept of limited liability means that a shareholder’s liability is limited to the value of its investment (the shares it owns). The shareholder’s personal assets are then out of reach of individuals who have sued the company.
  • A shareholder (or a stockholder) can be an individual or another company.
  • A limited liability company operates as a separate legal entity to its shareholders and directors. This is known as “separate legal personality”.

Where a company owns the majority of shares in another company, it may be called a “parent company” with the other company known as its “subsidiary”. These could be domestic subsidiaries or overseas subsidiaries, in which case the business is a TNC (discussed below).

The principles of separate legal personality and limited liability shield shareholders from some of the risks of doing business, such as the company facing a legal claim.

  • Courts are generally unwilling to disregard separate legal personality (known as to lift or pierce the “corporate veil”) to find a shareholder liable for the actions of the company in which it owns shares, even if it owns most of the shares.

 

c) TNCs

Where a business is formed of separate companies operating in different countries, it can be called a transnational corporation (TNC) or multinational corporation (MNC).

These businesses can operate as:

  1. Networks of connected subsidiaries, owned and controlled by the parent company (transnational groups or TNC Groups)
  2. Global value chains (GVCs) or supply chains involving a number of sub-contracting entities co-operating across borders, under the overall direction of the lead firm.
  3. A joint venture relationship, where there is an agreement between two independent businesses to undertake a common activity. This may be structured as a contract, a partnership or a limited liability company.
  4. A franchise relationship, where a business transfers a complete business format to a local distributor through a contractual arrangement.

TNC groups are made up of two types of companies:

  • The parent company: usually incorporated in the home country of the TNC.
  • Overseas subsidiaries: incorporated in the host countries where they operate. They are the arms of the parent company that operate across the world.

Example: Lungowe v Vedanta
Vedanta Resources plc (Vedanta) is the parent company of a UK mining TNC. Vedanta owns a majority shareholding in its overseas subsidiary Konkola Copper Mines plc (KCM) (a public company incorporated in Zambia). The Zambian government has a minority shareholding in KCM.

Zambian rural farmers are bringing a legal action in the UK (Vedanta’s home country) against Vedanta and KCM for pollution and damage to their lands, health and livelihood. The UK courts have accepted to hear the case against both companies even though the harm occurred in the host company, Zambia.
[see: https://www.leighday.co.uk/News/2019/April-2019/Supreme-Court-rules-Zambian-villagers-case-against]

This case will be discussed more in “How Can I Bring a Civil Claim Against a Business in a Foreign Court?

 

Transnational Corporate Groups

TNC groups are managed as a single business enterprise while remaining a collection of separately incorporated companies possessing the nationality of their place of incorporation.

As big international businesses, TNCs are more likely to have the resources to pay compensation for human rights harms.

However, there can be obstacles when trying to hold parent companies legally accountable for the actions of their subsidiaries:

  • Parent companies and subsidiaries are legally separate entities. This means the parent is often not legally responsible for the actions of subsidiaries;
  • Although parent companies are generally principal shareholders in the subsidiary and have trademark rights, they don’t technically “own” the subsidiary. This means the parent will enjoy the benefits of limited liability (see above); and
  • Although a parent company may control its subsidiaries through its majority shareholding in them, it may not be legally accountable for harm caused by its subsidiary unless it closely supervises, manages or has operational control over the subsidiary or harmful activity (see “Do Businesses Have Human Rights Responsibilities?”).

In addition, TNCs often try and avoid liability by adding several layers of holding companies (companies that don’t produce goods or services but have the sole purpose of owning shares) between the parent and its operating subsidiaries and by channelling business through subsidiaries in tax havens and other regulatory haven jurisdictions.

 

d) State-Owned Enterprises

State-owned enterprises (SOEs) are companies set up and controlled by national governments to run commercial activities.

  • SOEs generally operate in sectors where state control is important e.g. energy, defence industries, infrastructure, transport and financial services.
  • The state may be the sole or majority shareholder or may establish its control in the company incorporation documents.
  • SOEs can operate transnationally – these will be state-owned TNCs.
  • The national laws regulating SOEs will depend on the country of incorporation.

A key obstacle when trying to hold SOEs accountable is state immunity:

  • If the SOE acts as an arm of its home state carrying out sovereign functions, such as for example collecting state revenues, it will enjoy immunity from legal action.
  • Only if the SOE is engaged in purely commercial activities will it be amenable to claims.

 

e) Global Value Chains

Businesses will typically receive, produce, distribute goods and services through their supply chain (this is the sequence of activities and actors involved in bringing goods or services to the market, from the raw materials to final use).

The supply chain can be called a Global Value Chain (GVC) as it represents all activities adding value to the business. This may include business relationships e.g. sales to customers.

Example: Apple iPhone 6
In 2014, components in the Apple iPhone 6 were produced by 785 suppliers in 31 countries. The iPhone 6 is designed in the US and assembled in China and Brazil while companies in Japan and Taiwan supply components for the phone.

These companies may in turn sub-contract work to companies in other countries with lower labour costs.
[see: http://comparecamp.com/how-where-iphone-is-made-comparison-of-apples-manufacturing-process/]

TNCs that control GVCs may not own shares in the participating companies. Rather they may have contractual arrangements with these companies (who are sub-contractors) that allow the TNC to coordinate goods production or service provision across borders. These contractual arrangements can shift the risk of liability onto sub-contractors and leave important aspects of business operations to them.

  • For example, the sub-contractor will usually be fully responsible for the working conditions in their establishment and the TNC will have no part to play in these matters. As a result, it may not be held liable for any abuses of the workers [see: https://libguides.ilo.org/global-supply-chains-en]
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Contributors

Action4Justice would like to thank the following individuals and organisations for their contributions to the Action4Justice Business and Human Rights Guide:

  • Professor Peter Muchlinski of SOAS University of London and Brick Court Chambers;
  • Chara de Lacey of ShareAction;
  • Professor Robert McCorquodale of the University of Nottingham and Brick Court Chambers; and the

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