Taken place at 5th ICC European Conference
Business and human rights arbitration was the topic of the panel discussion at the 5th ICC European Conference convened last month. Ursula Kriebaum (Professor for Public International Law at the University of Vienna), Claire Bright (Assistant Professor in Private Law and Director of the Nova Centre on Business, Human Rights and the Environment) and Alexander Marcopoulos (Counsel in Shearman & Sterling’s International Arbitration group) made up the panel chaired by Marney Cheek (Partner at Covington & Burling LLP).
The panel addressed developments in this field since the UN Guiding Principles on Business and Human Rights were published 10 years ago, including arbitration rules designed for the specific requirements of disputes in this area, known as the Hague Rules on Business and Human Rights Arbitration, recent legislative initiatives in Europe and a project to develop of a system of arbitration to protect human rights at sea. The main takeaways from the session were:
The Hague Rules on Business and Human Rights Arbitration (the “Hague Rules”)
The Hague Rules are not intended to substitute judicial remedies but to provide an alternative where there are certain gaps in judicial processes.
In line with Pillar III (access to remedy) of the UN Guiding Principles, the Hague Rules aim to facilitate access to an effective remedy by providing a non-State, non-judicial process whilst at the same time giving businesses the opportunity to fulfil their obligations under Pillar II (corporate responsibility to respect) by way of an ex ante remedy in the event of any negative human rights impact in their operations, including in their value chains.
Business and human rights arbitration can be in the interests of both businesses and rights holders by enabling businesses to manage risk, honour contractual commitments and meet corporate responsibility obligations, as well as providing a remedial process for those potentially affected.
The Hague Rules are a modification of the the UNCITRAL Arbitration Rules, often used in matters of commercial arbitration, tailored to the particular requirements of business and human rights matters across all sectors.
Some key differences between the Hague and UNCITRAL Rules are provisions in the Hague Rules on witness protection (Art 33(3)), exceptions to transparency (Art 42), the selection of arbitrators with appropriate expertise for business and human rights disputes (Art 11), the identification of applicable substantive law (Art 46) and human rights compatible awards (Art 45(4)).
In balancing respect for party autonomy against providing clear guidance and default rules to reflect the special aspects of business and human rights arbitration, and the requirements of the UN Guiding Principles, the Hague Rules provide model clauses that parties are free to adopt.
There are also provisions dealing with the potential imbalance of power and inequality of arms between the parties, e.g. relating to representation and assistance; an obligation for the tribunal to manage proceedings proactively; and rules on fees and the apportionment of costs.
The Hague Rules aim to provide both flexibility and generality in order to deal with the multiple types of potential proceedings (i.e. business to business; victim to business; third-party beneficiraies; ex ante versus ex post consent).
The limitations of soft law and a voluntary approach towards human rights obligations and corporate social responsibility have led to a number of jurisdictions taking a more stringent approach in moving towards mandatory legislative requirements, particularly in Europe.
Two types of law have emerged: (i) reporting requirements, e.g. under the UK Modern slavery Act 2015; and (ii) mandatory human rights and environmental due diligence requirements, e.g. France’s Duty of Vigilance Act 2017; the Dutch Child Labor Due Diligence Act 2019; and the recent Supply Chain Law passed by the German parliament last month.
Key developments in the EU include a legislative proposal on mandatory human rights and environmental due diligence which would require Member States to implement rules ensuring companies carry out effective due diligence in these areas.
It is increasingly likely that companies will be required by legislation to have in place processes to identify, prevent, mitigate and account for potentially adverse human rights impacts in their activities, including in their supply chain, and that it will become a global norm of expected conduct for companies, wherever they operate.
Human Rights at Sea Arbitration
Human rights abuse at sea has worsened over time and includes slavery, human trafficking, assault and abandonment.
The problem is not due to a lack of substantive protection available under human rights legislation but a lack of enforcement and policing.
A major issue in this context is the uncertainty about where responsibility for the protection of human rights at sea lies.
This is an issue that is complicated by a whole host of jurisdictional considerations such as the jurisdiction of a ship’s registration, the nationality of its master and crew members and the nationality of vessel owners and charterers.
This area requires a bespoke approach to dispute resolution for which arbitration is well-suited.
The Human Rights at Sea arbitration project initiated by the UK based charity, Human Rights at Sea and Shearman & Sterling LLP seeks to develop an international arbitration-based mechanism of redress for human rights abuse at sea as an alternative route to an effective rememdy for victims.
“The project we are developing with UK charity Human Rights at Sea is focused on the maritime space, a sort of black hole where human rights protections seem to elude enforcement. Our project seeks to address this problem by empowering victims to raise arbitration claims directly against the party responsible for their abuse. This is a truly cutting edge idea: never before has a fully-integrated, private system of justice been created to address human rights issues in this way, including with bespoke arbitration agreements, offers of consent and arbitration rules, all of which are currently under development.
While we like to think of the progress made thus far as a product of the hard work the Shearman & Sterling and HRAS teams have contributed, one cannot overlook that there is also an element of inevitability to what we are doing. At bottom, this project is but one possible solution (in our view, the best one) to a problem that will need to be addressed in any event. Indeed, it’s only a matter of time that the human rights crisis at sea comes into focus the way that climate change and other environmental problems have done, and we hope that our work is at least helping to accelerate that outcome. In the same vein, we also see this as an opportunity for potential users to play a role in shaping whatever solution comes to bear. We are therefore devoting substantial time and energy to a process of consultation, through which we hope to collect and incorporate the views of concerned businesses, States and NGOs. We hope to launch that process later this year, but already see strong interest from major players in both the public and private sectors.”
Alex Marcopoulos, Counsel in Shearman & Sterling’s International Arbitration group
One may foresee certain challenges for business and human rights arbitration that lie ahead, in particular relating to consent and costs. The economic obstacles for parties seeking redress will be an issue that requires a considerable degree of flexibility, if not creativity, on the part of tribunals when determining costs issues. However, given the legislative trend towards holding businesses accountable and the need to provide access to an effective remedy, a tailored arbitration process may be just the solution. In the case of human rights at sea, a bespoke arbitration process could be an ideal mechanism for addressing a problem that cannot be ignored.
Other considerations include the length of time before an award is made. On this point it is worth noting that in many cases brought before national courts it can take several years just to determine issues of jurisdiction (e.g. the UK Supreme Court case: Lungowe & Others v Vedanta Resources Plc & KCM  UKSC 20 concerning alleged environmental pollution from Vedanta’s Zambian copper mine).
In conclusion, whether one shares the optimism of the panelists on the future of business and human rights arbitration, or not, one thing clear: it is moving forward.
Khadija has a background in both International Human Rights Law and International Corporate and Commercial Law.