Suzanne Spears discusses the proposed UN business and human rights treaty in PLC Magazine

In October 2022, the Intergovernmental Working Group on transnational corporations and other business enterprises with respect to human rights (IGWG) conducted an eighth round of negotiations in Geneva on a new United Nations (UN) treaty.

Eight years after talks began, political and legal challenges continue to stymie efforts to draft a legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises. The proposed treaty raises some thorny issues for both states and businesses.

Background and political context

The IGWG was established by the UN Human Rights Council in June 2014 with twenty states voting in favour of its creation, fourteen against and thirteen abstentions (www.ohchr.org/en/hr-bodies/hrc/wg-trans-corp/igwg-on-tnc). The home countries of many of the world’s largest transnational corporations were opposed, while countries that tend to host those corporations and their activities were divided. The treaty process has inevitably suffered from this weak political mandate. However, the latest round suggests a narrowing of the gap between its supporters and detractors.

This is the latest in a line of attempts to regulate the conduct of multinationals at the international level dating back to the 1970s. It stems from the conviction by activists, which has periodically been espoused by some developing countries, that the human rights protections in relation to corporate activity currently available under regional and national instruments are not sufficient. A legally binding instrument is needed to establish obligations for business and facilitate access to justice for victims of violations, according to proponents. They hope that such an instrument would prompt more multinational businesses to act with due diligence regarding the impacts of their activities on human rights around the world.

From polarization…

Those that are opposed to the treaty often point out that international human rights law already imposes obligations on states that are relevant to the regulation of corporate activity and that the 2011 UN Guiding Principles on Business and Human Rights (UNGPs) reminds states of that fact (www.ohchr.org/sites/default/files/documents/publications/guidingprin ciplesbusinesshren.pdf). They note that various attempts to regulate business conduct through international human rights law have failed in the past, and that a treaty approach is politically and legally challenging because human rights involve complex issues, approaches and interests. A treaty approach also is unnecessary, they argue, as governments already have the legal power to control businesses under their respective domestic laws.

Those who support the treaty argue that transnational corporations wield formidable economic power and are often effectively immune to state control. They argue that clarifying obligations and imposing them directly on transnational corporations is necessary, as human rights abuses can involve non-state actors in a globalised economy.

Initially, proponents of the treaty sought not only to impose human rights obligations directly on businesses by treaty, but also to create an international architecture to enforce these obligations and recommend remedies for their violation. This would follow the example of the core UN human rights treaties, the implementation of which is monitored by committees of independent experts – with the notable difference being that, while the committee that monitors the implementation of the most widely ratified human rights treaty, the UN Convention on the Rights of the Child (UNCRC), must track the performance of 196 sovereign states, a committee to monitor the implementation of a business and human rights treaty would need to track the performance of more than 60,000 multinational corporations, more than 500,000 subsidiaries of those corporations and, if they were in scope, millions of single nationality corporations. Not surprisingly, the current draft of the treaty – which is the Third Revised Draft (the Third Draft) – abandons this approach and instead obliges states to take certain steps domestically to ensure that businesses respect human rights and provide remedies for their violation.

This new approach helped several of the treaty’s former opponents that had not participated in negotiations, namely, the US, UK and the EU, to participate in the more recent rounds of talks. During the latest talks, the US said that it understood the motivations of those who wanted a treaty. The US pointed in particular to an increase in attacks against human rights defenders and growing pressure to protect human rights from the impact of climate change. However, the US also expressed concerns that the Third Draft still fails to account for the diversity of legal systems and is too prescriptive. Both Australia and the UK also argued that the Third Draft strayed too far from the approach of the UNGPs.

Ecuador, as Chair of the IGWG, released a set of less prescriptive proposed amendments to key provisions before the eighth session (the Chair’s Proposals). While this was viewed as an encouraging step by certain states, including the US, other states criticised the Chair’s Proposals as deviating inappropriately from the text of the Third Draft. Ecuador then clarified that their formal basis for the negotiations remained the Third Draft and agreed to consult further with a grouping of states on how to consolidate the various proposals.

State obligation to regulate business activities

One point of contention during the latest round of negotiations was the proposed obligations on states to prevent, and ensure the remediation of, business-related human rights impacts. Under Article 6 of the Third Draft, states would be required to “regulate effectively the activities of all business enterprises within their territory, jurisdiction or otherwise under their control” (Article 6.1). This would apply with respect to all internationally recognised human rights (Article 6.2).

The Third Draft provides that states must require business enterprises to undertake human rights due diligence through prescribed steps (Article 6.3). Those steps include requiring impact assessments to address human rights, labour rights, the environment and climate change (Article 6.4.a). It also calls on states to mandate non-financial reporting in respect of group structures, suppliers, and impacts on human rights, labour rights, health, environmental and climate change (Article 6.4.e).

Article 6 of the Third Draft has much in common with the mandatory human rights reporting and due diligence legislation already adopted or contemplated by several states, including the EU’s proposed Corporate Sustainability Due Diligence Directive (CSDD) and Corporate Sustainability Reporting Directive (CSRD) and the US Uyghur Forced Labour Prevention Act (UFLPA) and its implementation guidelines (see News brief “Corporate sustainability due diligence duty: gathering momentum”, www.practicallaw.com/w-034-8795). Nevertheless, the US proposed that Article 6 should not prescribe steps or features of human rights due diligence, arguing that states should merely be required to “take steps to encourage” proportionate human rights due diligence in order to ensure and promote business respect for human rights.

While they would require states to introduce mandatory due diligence and reporting, the Chair’s Proposals do not prescribe which businesses the requirements should apply to, nor the processes involved. They merely call on states to ensure that corporate due diligence meets certain criteria: that is, it should:

  • Take into account the experience of women and girls and the needs of the most marginalised.
  • Involve meaningful stakeholder consultation.
  • Ensure the safety of those at risk of retaliation.
  • If it involves engagement with indigenous peoples, adhere to the principle of free, prior and informed consent.

The vagueness of these provisions – which would establish procedural obligations of conduct, while avoiding precise obligations of result – would arguably diminish their legal status as well as the treaty’s overall ability to ensure that corporate due diligence obligations are as rigorous around the world as they are becoming in Europe and under the UFLPA in the US.

State obligation to provide access to remedy

Another contentious issue was the proposed obligations on states to provide access to remedies for business-related human rights impacts. The Third Draft would require states to provide their courts and non-judicial mechanisms with the necessary competence in accordance with the treaty to enable victims access to justice and to adequate, timely and effective remedy (Article 7.1).

One controversial proposal would require states, to remove the doctrine of forum non conveniens from their legal systems to ease access to remedies (Article 7.3.d). Although this doctrine has already been removed in the EU and the UK, it is a mainstay of US transnational tort litigation. Another clause would require states to allow judges reverse the burden of proof.

Instead of addressing matters in detail, the home states of many large multinationals raised general concerns. For example, Japan referred to the Third Draft’s access to remedy provisions as an area containing “fundamental flaws” and referred to the US statement on the topic. The US statement says the Third Draft contained “overly broad jurisdictional provisions”.

However, the Chair’s Proposals would merely require states to implement effective policies to “promote” access to justice, “progressively reduce” obstacles to effective remedies, and ensure that state agencies “can either deliver, or contribute to the delivery of” effective remedies. Furthermore, states would only be required to take steps that are consistent with their domestic legal and administrative systems.

State obligation to provide for legal liability

The content of the proposed obligation to provide for legal liability is also a contentious issue. Under the Third Draft, states would need to, “ensure that their domestic law provides for a comprehensive and adequate system of legal liability for human rights abuses by business, including in transnational activities, or arising from their business relationships” (Article 8.1).

States will be particularly sensitive to the specific provision that would require them to impose liability on businesses for their failure to prevent another legal or natural person with whom they have a business relationship, from causing or contributing to human rights abuses, where the former controls, manages or supervises that person or the relevant activity, or should have foreseen, but failed to take adequate measures to prevent, the abuse (Article 8.6). They are also likely to object to the provision that would require domestic legal systems to provide for the criminal liability of legal persons for human rights abuses that amount to criminal offences under international human rights law binding on the states or customary international law, or their domestic law (Article 8.8).

The US remarked that Article 8 was concerning because of its “unclear liability provisions, and potential criminalisation of an ill-defined range of human rights abuses”.

Again, Ecuador sought to reduce the impact of these provisions. As chair, it proposed that the requirement to introduce legal liability should be subject to domestic legal requirements. Likewise, liability for human rights abuses arising out of business relationships should be in accordance with existing domestic legal principles on liability for conspiracy to commit and “aiding, abetting, facilitating and counselling” that type of abuse.

A long road

These latest negotiations suggest that, while opposition to the idea of a business and human rights treaty may be subsiding, states remain divided over its form and content. The Chair’s Proposals may have been intended to bridge that divide, but they have not succeeded, as yet.

During the latest session, a number of states that are home to major transnational corporations expressed interest in the US proposal that the treaty should take a less prescriptive approach, more akin to a framework agreement, that builds on the UNGPs with more prescriptive elements addressed through optional protocols. However, other states continued to add more detail to the proposed treaty.

With Ecuador looking to publish an updated draft by the end of July 2023, the long road towards a business and human rights treaty will wind on for some years to come.

Suzanne Spears shortlisted for “Disputes Lawyer of the Year” at the Women and Diversity in Law Awards

We are delighted to announce that Founder and Principal Suzanne Spears has been shortlisted for “Disputes Lawyer of the Year” at the Women and Diversity in Law Awards.

The Women and Diversity in Law Awards, hosted by The Global Legal Post, showcases individuals who have dedicated their time and professional careers to facilitating change and promoting diversity, equity and inclusion (DE&I).

The awards ceremony will take place on Tuesday, 21 March 2023 at Marriott Grosvenor Square.

Find out more about the awards here.

Founder and Principal Suzanne Spears interviewed by Law360

Suzanne’s interview was published in Law360, 4 January 2023, and can be found here.

 

In the interview, Suzanne discusses what led her to leave BigLaw, start her own boutique and how her work will differ from that of a large commercial firm. She also discusses the increased importance placed on companies regarding their human rights due diligence.

Download PDF

News of Paxus’ launch covered extensively in the legal press

Suzanne Spears, a former Allen & Overy partner, has launched Paxus LLP, a boutique business and human rights focused law firm based in London.

 

News of the firm’s launch has been published in Legal Week, here, The Global Legal Post, here, New Law Journal, here, Legal Era, here, and The Law Society Gazette, here.

Former A&O partner launches global business and human rights-focused law firm in London  

Today, Suzanne Spears, a former Allen & Overy partner, is launching Paxus LLP, a boutique business and human rights focused law firm based in London. The firm will practice in the areas of international law, international arbitration and transnational law and offer strategy, due diligence and dispute resolution services.  Its clients will include multinational corporations, investors, international financial institutions and governments.

Commenting on this area of the legal market, Suzanne Spears said: “Environmental, social and corporate governance (ESG) matters are more widely discussed than ever, and human rights are at the core of many ESG issues.  New human rights related transparency and due diligence regulatory requirements are coming into effect across the globe. International disputes and investigations involving human rights issues are multiplying rapidly, and greenwashing about human rights issues is becoming a serious concern. Addressing the corporate and personal risks associated with these issues requires a rigorous assessment of the legal and procedural issues at play, as well as a commercially-minded and credible multidisciplinary approach to the law.”

Spears has spent twenty years practicing in these areas with leading global law firms in London and New York, most recently as a partner in the Litigation, Arbitration and Investigations Group at Allen & Overy, where she co-headed the Global Business and Human Rights Practice and co-founded the ESG Group.  In her long career in international arbitration, she has specialised in representing both investors and States in disputes arising under international investment treaties; and she has also served as lead lawyer in transnational tort litigations involving ESG issues. In addition to being a lawyer, Spears is a political and social scientist by background, and has held international law and policy positions with the United Nations, the Council on Foreign Relations, and the Organisation of American States.

Spears, who left Allen & Overy in June, will be joined at Paxus by three other former members of Allen & Overy’s international arbitration team in London, including Sebastián Mejía, a tri-qualified Spanish-Colombian lawyer; and Olga Owczarek and Finnuala Meaden-Torbitt, both English solicitors.

The ex-A&O team at Paxus is also joined by Dr Kuzi Charamba, who specialises in sustainability-related legal matters globally and especially in Africa; Aishwarya Nair, an international arbitration and sustainable development specialist with a background in India and the Middle East; Sebastián Abad-Jara, who focuses on international law and comparative constitutional law in Latin America; and Leonardo Camacho, who focuses on public policy and constitutional law in Asia. Every member of the team combines relevant professional experience with graduate qualifications in law, international affairs or public policy from leading universities in the UK, US or Canada, including Oxbridge and Ivy League.

Paxus aims to help clients solve problems and resolve disputes that arise globally in relation to business impacts on human rights and the environment. The team will provide strategic advice to businesses operating or investing in high-risk countries, legally privileged due diligence and investigations services, and representation in disputes subject to arbitration, transnational litigation or non-judicial processes, such as operational level grievance processes or international organisation complaints procedures. Paxus will conduct its own business in line with the United Nations Guiding Principles on Business and Human Rights (UNGPs).

Commenting on the launch of the new firm, Suzanne Spears said: “Paxus will provide a conflict-free international legal advice and representation service to clients who are committed to building a sustainable future and conducting business with respect for human rights.  In addition to our avowed social purpose, where we really stand out is in our combination of international relations and international law background with commercial awareness and experience.”

Spears added: “Multinational corporations, as well as their investors and directors, are increasingly coming under public and regulatory scrutiny. It is imperative that they and their in-house counsel are alive to and take action to address the potential risks, legally, commercially and reputationally, that non-compliance with international standards of conduct can have on their businesses.”

Headquartered in London, Paxus LLP plans to pursue a strategy of organic growth, appointing additional lawyers as the firm continues to expand.

Suzanne Spears discusses the Court of Appeal’s Samarco decision in the Global Legal Post

Overturning a High Court ruling, the Court of Appeal in Municipio de Mariana v BHP Group plc and BHP Group Ltd [2022] EWCA Civ 951 held that the difficulty of litigating claims in the UK should not deny claimants access to justice.

Devastation

In November 2015, the Fundão tailings dam collapsed, killing 19 people as well as destroying villages and polluting the Rio Doce River.  The dam was owned and operated by Samarco, a Brazilian company jointly owned by Vale and BHP Brazil. The claimants include 200,000 individuals and 530 businesses, while the defendants are BHP England and BHP Australia.

Jurisdiction over BHP arises from its UK domicile under the Brussels Recast, which still applies under the EU-UK Withdrawal Agreement, while jurisdiction over BHP Australia is established via its UK offices.

Prior to the UK damages claims, which total circa £5bn, multiple claims were filed against other defendants in Brazil, including one for 155bn reals (£21.3bn). Meanwhile Samarco, Vale and BHP Brazil established a compensation/remediation programme via Renova, a Brazilian private foundation.

In 2020, the High Court struck out the UK claims as an abuse of process. Mr Justice Turner found that they would be “irredeemably unmanageable”, deeming the proceedings to be “futile and wasteful”.

Not an abuse of process

The Court of Appeal found that the claims were not an abuse of process.  It noted that the Judge was influenced by what he considered to be complications arising from parallel proceedings in Brazil, and what he described as an “acute” risk of “unremitting cross-contamination” of proceedings.  Undertaking the “scrupulous analysis” that it considered the Judge should have undertaken, the Court of Appeal found that the facts did not support his findings.

According to the Court of Appeal, the risk of unmanageability – or as the Judge put it, “utter chaos” – due to the Brazilian proceedings is not clear and obvious.  Although “down the line” some individual claims may need reviewing, that does not make them unmanageable.  The Court found that there was no proper basis for the Judge’s finding that the proceedings were abusive on the basis of irredeemable manageability.

The Court also found that the Judge wrongly relied on forum non conveniens factors.  The risk of inconsistent judgments, “challenge of language” and translation costs, needs to apply Brazilian law. The unlikelihood of claimants or witnesses being permitted to give evidence remotely from Brazil (as a matter of Brazilian law) and the burden placed on English courts were not grounds for establishing an abuse of court.  Under the Brussels Recast, a member state’s courts have no power to decline jurisdiction over a defendant domiciled and sued in that member state by reference to foreign proceedings or other difficulties.  Moreover, the Court of Appeal had “considerable doubts as to whether proceedings can ever truly be said to be ‘unmanageable’”, noting that the claimants had provided the Court with “clear illustrations of case management options.”

The Judge had also characterised the claims as abusive for being pointless and wasteful, which the Court of Appeal rejected, noting it was unclear on the evidence that the claimants could benefit from proceedings in Brazil or otherwise obtain full redress there.  The Court did not wish to discourage claimants from engaging with whatever opportunities existed in Brazil.  However, it did not consider Brazilian remedies so obviously adequate that it would be pointless and wasteful to pursue proceedings in the UK.  The Court held that, given the realistic prospect of success, the UK claims would not be struck out.

Stays unnecessary

The Court of Appeal also found that the High Court had erroneously found that the cases should be stayed.

With respect to BHP Group Plc, the Judge had originally decided that claims should be stayed under Article 34 of the Brussels Recast, which gives the court jurisdiction to stay proceedings brought against a defendant in the jurisdiction of its domicile where there arises a risk of irreconcilable judgments between the courts of a member and non-member state of the EU.  However, the Court of Appeal found that the Brazilian proceedings did not create the risk of irreconcilable judgments and no such risk existed such that the court would have been obliged to stay the English proceedings under Article 34.

According to the Court of Appeal, the Judge was wrong to stay proceedings in the case of BHP Group Ltd on the basis of forum non conveniens. Under the test set out in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460, the defendant must satisfy the court that another jurisdiction is manifestly more appropriate for trying the dispute.  If the court is satisfied, the claimant must show that circumstances exist requiring that a stay should nevertheless be granted.

The Court of Appeal found that there was a real risk of no available route in Brazil for the claimants to pursue their claim, and that even if a process was available, a real risk existed that the claimants could not obtain substantial justice in Brazil.  The Court noted that the Judge had erroneously taken into account the redress potentially available to other parties in Brazil in discounting the evidence that there were insuperable obstacles to the claimants pursuing a claim against BHP Australia in Brazil, and also in suggesting that the claimants were required to “test the water” in Brazil first before bringing their claims in the UK.

The Court concluded that claims against the English entity should not be stayed on the grounds of irreconcilable judgments and those against the Australian entity should not be stayed under the doctrine of forum non conveniens.

Comment

For UK-based parent companies with overseas subsidiaries, the Samarco decision offers important lessons about increased risk. By continuing the trend of UK courts opening their doors to cross-border ESG litigation, it follows jurisdictional rulings by the Supreme Court – for example, Jalla v Royal Dutch Shell Plc [2020] EWHC 459 and Vedanta Resources PLC and another v Lungowe and others [2019] UKSC 20.

A key factor in these rulings was that the claimants could not obtain substantial justice against multinational corporations and their local subsidiaries in foreign countries. Accordingly, for defendants to appear willing to provide remedies is an insufficient solution; substantial justice requires that effective remedies are available to the claimants.

Similarly, the Samarco decision increases the liability risk to UK-based companies for the conduct of their foreign subsidiaries. It is also simply insufficient to issue sustainability reports and claim to engage in sustainability due diligence; the objective must be to prevent or mitigate human rights and environmental harms.

 

Risks to multinationals

The Samarco decision further illustrates the risk to UK-based companies associated with applying foreign law in cross-border disputes. Lax environmental regulation and enforcement is not a location advantage.  Instead, it poses litigation, reputation and financial risks to multinationals which fail to meet international standards of conduct.

A&O Partner Suzanne Spears leaves to set up specialist business and human rights firm

The public international law and disputes lawyer’s move reflects the tectonic shift taking place across the global legal sector caused by the rise of environmental, social and governance (ESG) issues. In Europe and around the world, new human rights related transparency and due diligence regulatory requirements are coming into effect, international disputes and investigations involving human rights issues are multiplying rapidly, and ‘greenwashing’ about human rights issues is becoming a serious concern.

Commenting on these developments, Spears said that: “The time is right to establish a firm focused on business and human rights to advise corporate general counsel, and the investment and finance community. Corporates need legal advice and representation in disputes informed by an understanding of geopolitical and local socio-economic factors, and the views of affected stakeholders. Multidisciplinary thinking is required to help clients establish and maintain not only their legal but also their social licences to operate and resolve disputes regarding issues that are not always effectively regulated in the global economy”.

The new firm, which is launching in the autumn, will focus on human rights due diligence, impact assessments and investigations, and support the resolution of disputes through international arbitration, transnational litigation and non-judicial processes. It will also counsel clients on ways to prevent and eliminate human rights-related harms, and to seize opportunities to advance human rights by adhering to internationally recognised standards.

Spears’ firm aims to fill a gap in the market by providing legally privileged advice from a conflict free platform with flexible fee models, and the agility to draw upon a network of local lawyers and experts for country-specific advice. Conflicts and high fees often limit the ability to offer such advice from the platform of a large law firm, while clients are exposed to significant legal risks if they engage non-lawyer consultants to uncover and address sensitive human rights issues. Spears, who has long held the goal of establishing her own Business and Human Rights practice, said that: “The surge of corporate interest in Environmental, Social and Governance factors, and a recent focus on the Social aspect in particular, makes it an exciting time to build a new style of specialist multidisciplinary firm.” Spears added: “I plan to make further announcements in the autumn, including announcing my colleagues in the new venture.”

A spokesperson for Allen & Overy commented: “Suzanne Spears has left Allen & Overy. We’d like to thank her for her contribution and wish her well for the future.”

News of Suzanne’s move was published in Legal Week, Global Arbitration Review, Bloomberg Law, Law360, The Legal Diary, CDR News, and The Global Legal Post.

CONTACT