Editor's Note: Marie Wilmet is a research intern in Public International Law at the Asser Institute. She recently graduated from Leiden University’s LL.M. in Public International Law. Her main fields of interest include international criminal law, humanitarian law and human rights law as well as counterterrorism.

The Alliance for Torture-Free Trade was launched on 18 September 2017, at the 72^nd Session of the United Nations (UN) General Assembly, by a common initiative of Argentina, the European Union (EU) and Mongolia. It aims at ending the trade in goods used to carry out the death penalty and torture. Indeed, even though torture is unlawful under public international law, these goods are currently available on the open market across the globe. By banning such tools from global trade, the Alliance hopes to reduce the possible human rights violations by complicating the perpetrators’ acquisition of the means to execute and torture people.

This initiative is part of a broader agenda both at the UN and EU level. It falls under the broader umbrella of UN projects such as the UN Guiding Principles for Business and Human Rights or the UN Global Compact. Moreover, the EU has tried in the recent years to strengthen the rule of law by conducting policies where trade and values are more interrelated. As the EU Trade Commissioner Cecilia Malmström stated, “human rights cannot be treated as an afterthought when it comes to trade”.

This blog will first retrace the origins of the Alliance by outlining the current factual and legal framework surrounding torture, the death penalty and related trade. Then, the Alliance and its ambitions will be analysed, along with the chances of its effective implementation.

Torture and capital punishment under international law, state of legality and reality?

The use of torture is prohibited by Article 5 of the Universal Declaration of Human Rights and by Article 7 of the International Covenant on Civil and Political Rights (ICCPR). The Convention against Torture and Other Cruel, Inhuman or Degrading Treatment, outlawing the practice of torture, has been ratified by 158 countries and most regional human rights treaties equally proscribe it. The prohibition of torture under international law is so established that it became a peremptory norm of international law, meaning that it is absolute and applies to all states, in all circumstances.

By contrast, the death penalty is not illegal under international law. Indeed, Article 6 of the ICCPR permits its use under certain circumstances. Capital punishment can be applied following a judgment rendered by a Court, for the most serious crimes and in accordance with the law. The provision nevertheless provides that –“nothing in this article shall be invoked to delay or to prevent the abolition of capital punishment”–. The Second Optional Protocol to the ICCPR, binding on its 85 state parties, prohibits capital punishment. There is a global trend to abolish the death penalty, as was recognised by the adoption of several UN General Assembly resolutions demanding a moratorium on executions. The resolutions urged states to respect the UN Economic and Social Council’s Safeguards guaranteeing the protection of the rights of those facing the death penalty, as well as to restrict the use of offences punishable by death.

Despite the complete prohibition of torture and the partial prohibition of the death penalty, the reality is alarming. According to Amnesty International, torture is still used in 140 states, either in isolated cases or systematically. In a 2014 report, the NGO found that 79 state parties to the Convention against Torture were still practising it. The death penalty is still applied in 25 countries and an estimate of 20,292 people are awaiting execution worldwide. This figure does not include the application of capital punishment in China, as the country does not publish official data. Available information nevertheless indicates that thousands of people are executed in the country every year. There is therefore a clear discrepancy between the legal framework surrounding the use of torture and death penalty and the reality in practice.

Why? A macabre but booming business, barely regulated…

According to Amnesty International and the Omega Research Foundation the discrepancy can be explained by the international trade in torture goods which is currently out of control. The goods of torture extend from mechanical restrain devices, to direct contact electric shock weapons, body worn electric shock devices, riot control agents, kinetic impact devices as well as pharmaceutical drugs used in lethal injections. They can be separated in two categories: the inherently inhumane equipment and the tools which, if used in conformity with human rights obligations, can have a legitimate use (such as in law enforcement).

The lack of trade regulations on such goods fuels a depressing reality where torture and execution tools are freely traded, transited and marketed around the globe. A report by the Institute for Security Studies (ISS) found for example that Force Products, a South African company was manufacturing a range of prohibited electric shock equipment. The company was then trading it with companies in Africa, America, Asia and Europe, who were subsequently in charge of distributing the equipment locally. Other companies such as Imperial Armour have exhibited the abusive equipment at international trade exhibitions in the Middle East and North Africa region and Europe. In light of those findings, the ISS and the Omega Research Foundation call for a prohibition on law-enforcement equipment that has no other purpose than torture or degrading treatment.

At present, no global binding legal instrument regulates the torture trade. The UN General Assembly has called for a ban on the production and trade of torture tools in resolutions 67/161 and 70/146, in respectively 2013 and 2016. The UN Special Rapporteur on Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment has repeatedly pushed for the introduction of controls in that trade area.

On the regional level, however, more initiatives have already been taken. The African Union agreed in 2002 to prescribe, in the Robben Island Guidelines, the –“use, production and trade of equipment or substance designed to inflict torture and the abuse of any other equipment or substance to these ends”–. The Guidelines, however, are not binding on the member states and have only a supporting role in the interpretation of the African Charter on Human and People’s Rights. The EU, on the other hand, has established a unique binding system of multilateral trade controls to outlaw the international trade in torture and capital punishment equipment.

The only example in the world of a binding system: the EU Council Regulation 1236/2005 and following amendments

The EU Council Regulation No. 1236/2005,  -and its evolution through the 2011 and 2014 amendments culminating into Regulation No. 2016/2134, forms the most comprehensive trade control regime on tools used for capital punishment and torture. Under EU law, regulations are directly applicable in, and legally binding on, all the member states of the Union. As such, it constitutes a unique example of a binding system regulating the torture trade.

The 2005 Regulation banned the import and export of two types of torture goods: the prohibited and the controlled goods. The first category of goods, subject to a complete ban, are those which can only be used for torture or applying the death penalty. The second category concerned goods that could be used for such purposes, but which have been designed for other reasons, such as law enforcement or medicinal use. Those goods were subject to trade control which required a specific authorisation by national authorities on a case-by-case basis. In 2011, the list of products covered by the Regulation was extended to include an export ban on drugs which could be used in lethal injections, such as the anaesthetic sodium thiopenthal. In 2014, the European Commission established the Commission Implementing Regulation No. 775/2014, which further expanded the list of goods falling within the scope of the regulation. Tools deemed unsuitable for use by law enforcement, for instance abusive restraint equipment, were also included in the trade ban.

Despite these changes, the 2005 regulation was highly criticised for the legal loopholes it contained and civil societies organisations highlighted several issues with the trade control system. First, even if the torture trade was forbidden in the EU, the equipment was nevertheless promoted in arms trade fairs and exhibitions in France, Germany or the UK. Second, companies in the Czech Republic, France, Germany, Poland and Slovenia were promoting new goods, completely unfit for use by law enforcement agencies, but which were not forbidden under the regulation. Third, there was a lack of control on brokering services regarding such goods and on the transit of goods within the Union. Indeed, the regulation did not expressly forbid the transit of goods coming from non-EU countries to a destination in a third country, leading to prohibited goods passing through EU ports and airports.

Consequently, in 2016 the EU Parliament adopted amendments to the 2005 regime in Regulation No. 2016/2134 in order to strengthen the existing system. The new legislation bans the transit of prohibited products within the EU, prohibits the display at EU fairs and forbids general promotion of torture and capital punishment equipment. It also outlaws the provision of brokering services, such as technical assistance for installation, repair and maintenance of the prohibited equipment. Finally, the 2016 amendments introduces a fast-track procedure to add new goods on the list, in order to face the technological evolution in the torture trade.

The current system with its established modifications has yielded positive results and has led to the decrease of the trade of goods used for torture and capital punishment within the EU. The EU ban on torture trade is part of its broader commitment to advocate the global end of torture and capital punishment in the framework of its Common Foreign and Security Policy. Given the success of the EU ban, the EU Trade Commissioner decided to take the initiative to the international fora.

The need for a global Alliance and the four step approach

The Alliance for Torture-Free Trade was initiated by Argentina, the EU and Mongolia. Argentina has ratified the ICCPR 2^nd Optional Protocol in 2008 and has, ever since, been very active internationally by mobilising support to abolish the death penalty worldwide. It has, among others, drafted the 6^th UN General Assembly resolution on a moratorium on the use of the death penalty with Mongolia. The latter abolished the death penalty in 2015 and is leading by example in a region where torture and executions are common practice. Together, they joined the EU around the idea that trade is positive but that it has to be based on values.

Drawing from the effectiveness of the EU ban, the three actors realised that such a global problem was calling for a global response. Indeed, those who produce and trade torture goods are constantly modifying their routes to circumvent domestic laws. The Alliance for Torture-Free Trade was thus created and opened to any state who has ratified the 2^nd Protocol to the ICCPR. On 18 September 2017, 58 states signed the political declaration and joined the Alliance.

By signing the declaration, states agree to follow a four-step approach in order to ban the torture trade. First, the states consent to taking measures to control and restrict the exports of these goods. Second, they commit themselves to provide the custom authorities with the appropriate tools to fight those perpetrating the trade. Third, the participating states agree to give assistance to countries in need of help to set up and implement the laws banning the trade. Finally, the states will exchange best practices for control and enforcement system. Additionally, a platform will be created in order to share information, monitor trade flows, and identify new objects appearing on the market.

The Alliance for Torture-Free Trade’s ambition is to first bring like-minded countries together by signing a political commitment to banning the trade in goods that can be used for torture or capital punishment. Then, it is aimed at fostering a global effort to help local customs identify and track the torture trade transit. Eventually, the ultimate goal of the Alliance is to see the creation of a legally binding treaty under the auspices of the UN. In the absence of such a legally binding commitment, however, one could wonder if the Alliance is currently more than merely a token exercise.

The Alliance on Torture-Free Trade: a token exercise or an ambitious promise?

The political character of the Alliance and of the declaration can cast doubts on its effective implementation and potential success. Indeed, its efficiency heavily relies on the goodwill of the participating states. Even though the commitments are not legally binding, several means have been identified to ensure that individuals, companies and governments align with the Alliance in the state concerned.

According to Member of the European Parliament Marietje Schaake, one of the crucial steps to ensure the success of the Alliance is to establish individual accountability mechanisms for breaches of the ban. Article 17 of the 2005 Regulation required member states to put in place –“effective, proportionate and dissuasive penalties”– for violations of its provisions. Similarly, states who have joined the Alliance should introduce such provisions in their domestic legal system in order to deter possible infringement and ensure the decrease of the torture trade within their borders. By adopting a legal deterrent for those who engage in the torture trade, individuals and companies are more likely to increase their cooperation with the Alliance.

These legal deterrents can, in turn, affect states which have not accepted the declaration by reducing their material capacity to use torture or capital punishment. There are signs, for example, that the EU 2011 export ban on sodium thiopenthal has been effective in diminishing the number of US executions. In the US, lethal injection is the prevailing method for the death penalty and requires the use of sodium thiopenthal. The EU ban on the drug has created a shortage in the US, leading to a clear decrease in the number of executions.

The UN Assistant Secretary General also believes that the financial and reputational risks can encourage states and corporations to comply with restrictions promoted by the Alliance. This claim seems to be corroborated by the actions of the pharmaceutical industry worldwide. Since the EU ban on sodium thiopenthal, the US main pharmaceutical companies have decided to stop producing the drug, because of the tarnished image it engendered. The Indian company Kayem Pharmaceuticals also refrained from selling the drug to the US because of its misuse in lethal injections, inconsistent with the firm’s Hinduist values.

Moreover, foreign ministries promoting national companies that do not respect the ban on torture and death penalty goods would also see their reputation damaged. If this reputational incentive holds, Members of the Alliance will be likely to apply the four guidelines, establish the relevant laws domestically and share information with other members. By expanding the geographical reach of the ban on torture and capital punishment tools, the Alliance could therefore reduce their trade on the global level. It is too early to say whether this soft implementation of the Alliance’s goals and proposals will lead to encouraging results. In light of the European success story, one can nevertheless be hopeful about the possibilities of reducing this despicable trade.

Concluding remarks: 

The Alliance for Torture-Free Trade offers a softer perspective on the fulfillment of  -international human rights law obligations, by directly- addressing the trade which enables abuses to be perpetrated. The creation of a global comprehensive trade control regime on tools used for capital punishment and torture, such as the currently effective EU one, could lead to the decrease of such abusive practices worldwide. The ultimate solution seems to be the creation of a binding treaty prohibiting the torture trade under the auspices of the UN, which would compel states and private actors to respect human rights while engaging in business relations. Until then, only time will reveal the success of the political Alliance and whether, as Cecilia Malmström put forward, political commitments can indeed “be a way to strengthen human rights around the globe.”

Editor's Note: Catherine Dunmore is an experienced international lawyer who practised international arbitration for multinational law firms in London and Paris. She recently received her LL.M. from the University of Toronto and her main fields of interest include international criminal law and human rights. Since October 2017, she is part of the team of the Doing Business Right project at the Asser Institute.

Background

At the United Nations Forum on Business and Human Rights from 27-29 November 2017 in Geneva, discussions focused on the central theme of Realizing Access to Effective Remedy. With an increasing focus on this third pillar of the United Nations Guiding Principles on Business and Human Rights, a working group of international law, human rights and conflict management specialists (Claes Cronstedt, Jan Eijsbouts, Adrienne Margolis, Steven Ratner, Martijn Scheltema and Robert C. Thompson) has spent several years exploring the use of arbitration to resolve business and human rights disputes. This culminated in the publication on 13 February 2017 of a proposal for International Business and Human Rights Arbitration. On 17 August 2017, a follow-up Questions and Answers document was published by the working group to address the principal questions raised about the proposal during the three-year consultation with stakeholders. Now, a drafting team is being assembled, chaired by Bruno Simma, to prepare a set of rules designed specifically for international business and human rights arbitration (the Hague International Business and Human Rights Arbitration Rules) in consultation with a wide range of business and human rights stakeholders. Once drafted, the rules will be offered to the Permanent Court of Arbitration and other international arbitration institutions and could be used in arbitration proceedings managed by parties on an ad hoc basis.

Introduction

Part 1 of this three-part blog series gave an overview introduction to the proposal for international business and human rights arbitration. This Part 2 focuses on (1) the potential advantages of using international arbitration to resolve such disputes, as well as (2) the substantial challenges the proposal will face in practice. Part 3 will then provide a case study of the Accord on Fire and Building Safety in Bangladesh’s binding arbitration process.

1.     The potential advantages of international business and human rights arbitration

The working group’s proposal to use international arbitration for the resolution of business and human rights disputes offers many potential advantages. As alluded to in Part 1 of this blog series, international arbitration can undoubtedly provide a more neutral forum, whereas domestic or international courts may face political pressure or judicial corruption. Arbitration would allow both parties to a dispute to select their own judges, who could, in theory, be impartial experts in business and human rights law and practice and accordingly more sensitive to the often complex issues at stake. This may particularly be welcomed in politically or emotionally charged human rights disputes. Additionally, international arbitration would allow for greater procedural flexibility and efficiency, as compared particularly to domestic court systems. Proceedings could be more tailor-made to fit both parties’ locations, means and resources, and resolved more swiftly than might otherwise be the case in business and human rights disputes. Other potential advantages include (a) the universal recognition of the arbitral award, and (b) an increase in supply chain responsibility.

a.     Universal recognition of the arbitral award

Final awards rendered in international business and human rights law arbitrations could include monetary damages, injunctive relief and close monitoring of future compliance. As the working group’s Questions and Answers document confirms, such awards could have the advantage of being enforceable under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). The New York Convention provides for the recognition and enforcement of foreign arbitral awards within its 157 State parties. The courts of each member nation must recognise foreign arbitral awards as binding and enforce them, unless the party against whom the award is being invoked can prove that there is reason to refuse enforcement. The limited grounds for refusing this universal recognition are outlined in Article 5 of the New York Convention, notably that:

• The parties to the agreement to arbitrate were under some incapacity or the agreement to arbitrate is not valid under the governing law or the law of the country where the award was made.
• The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present its case.
• The award contains decisions on matters beyond the scope or terms of the submission to arbitration.
• The arbitral authority’s composition or arbitral procedure was not in accordance with the parties’ agreement or, failing such agreement, the law of the country where the arbitration took place.
• The award is not yet binding, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made.
• The dispute’s subject matter is not capable of settlement by arbitration under the law of the country in which enforcement is sought.
• The recognition or enforcement of the award would be contrary to the public policy of the country in which enforcement is sought.

Accordingly, parties have an established means by which to achieve the recognition and enforcement of final awards handed down by tribunals in business and human rights arbitrations.

Although this could provide a clear route by which parties can receive any monetary damages, it may however be found lacking when it comes to potential long term monitoring and supervision requirements of any business and human rights arbitration award. Business and human rights arbitration tribunals might well require in the award that a party’s actions to remedy a particular human rights breach are supervised, and that its future compliance with human rights obligations is closely monitored. In this vein, additional mechanisms of enforcement and monitoring may need to be developed, perhaps along the lines of the Permanent Court of Arbitration’s Optional Rules for Conciliation of Disputes Relating to Natural Resources and/or the Environment.

b.    Increase in supply chain responsibility

As the working group explains, international business and human rights arbitration has the potential to “reinforce global governance” and might encourage and assist businesses to better manage their supply chains in order to avoid rights abuses. Businesses are increasingly altering their supply chain contracts to observe human rights norms, particularly in line with the United Nations Guiding Principles on Business and Human Rights. In this manner, international arbitration for the resolution of any human rights disputes could be inserted into the contractual terms and conditions between companies and their immediate business partners.

Precedent contracts between parent companies, subsidiaries, suppliers and contractors could simply be amended to include business and human rights commitments along with a business and human rights arbitration clause. They might include clauses requiring business partners to observe specific norms or to refrain from particular practices which might lead to human rights abuses. They could also include clauses granting potential victims, workers or members of affected communities the right to enforce the human rights clauses. Parent companies might use perpetual clauses to ensure effective supply chain responsibility, meaning that parties throughout their entire chain of subsidiaries, suppliers, contractors and subcontractors are required to insert the same provisions into their own contracts. As the working group’s Questions and Answers document explains, any defaulting party could then be subject to a binding business and human rights arbitration process brought by any party empowered under the contract to invoke proceedings.

These steps would create a chain of contracts that protect victims from human rights abuses and provide businesses with an avenue to reduce or eliminate the risk of abuse for which they may share a degree of responsibility (see previous blog: Lungowe v Vedanta and the loi relative au devoir de vigilance: Reassessing parent company liability for human rights violations). The availability of international arbitration could allow businesses to better manage their supply chains and facilitate responsible conflict management in the event of any human rights abuses.

2.     The challenges facing international business and human rights arbitration

The working group’s proposal to use international arbitration for the resolution of business and human rights disputes also raises many potential challenges. Careful consideration must be given to the existing limitations of international arbitration. For instance, compared to domestic court systems, arbitration offers limited options for the summary dismissal of spurious claims. The recourse mechanisms available to defendant corporations must be reassessed when developing business and human rights arbitration to enable the early dismissal of unfounded allegations. Another key area for debate, is which norms or laws would be applied by the arbitral tribunal in business and human rights disputes, and indeed whether they would recognise corporate liability for human rights violations. As evidenced through Kiobel v Royal Dutch Petroleum, Jesner v Arab Bank and Lungowe v Vedanta, the question of corporate liability for human rights violations under international and domestic law remains open in many jurisdictions. As for the possibility of incorporating voluntary guidelines such as the United Nations Guiding Principles on Business and Human Rights, attention must be paid to the potential implications of making soft law a binding and contractually enforceable obligation. A successful business and human rights arbitration mechanism must also work to overcome the existing criticisms of international arbitration, often focusing on cost and efficiency. Moreover, in contemplating whether party appointed arbitrators or a permanent standing arbitral tribunal is more appropriate, the working group must consider issues such as the role of arbitrator bias and experience, as well as the feasibility of having multiple decentralised offices if a Court of Arbitration for Sport model were to be followed. As briefly mentioned in Part 1 of this blog series, other potential challenges include (a) an inequality of arms between parties, and (b) the transparency of arbitration proceedings.

a.     Inequality of arms between parties

As the working group’s Questions and Answers document explains, often victims of businesses’ human rights abuses are poor and accordingly cannot compete on equal terms in disputes against well-resourced business opponents. Unfortunately, this inequality of arms issue might be compounded through the use of international arbitration, as its high party and common costs, alongside procedural complexity, could place victims at a significant disadvantage.

International arbitration has been described as a “rich man’s game, best left to large companies, insurers and organs of sovereign states”. Both parties to international arbitral proceedings generally incur:

• Administrative charges by the arbitral tribunal.
• Fees and expenses of the tribunal, external counsel, experts and specialist services, such as transcribers and interpreters.
• Hiring fees for hearing room(s) and facilities.
• Expenses of testifying witnesses.
• Significant costs for legal representation.

Accordingly, in promoting the international arbitration of business and human rights disputes, efforts must be made to deal with the inequality of arms that victims of rights violations may face when attempting to assert their rights, and how they might afford the costs associated with arbitration proceedings.

Indeed, the working group’s proposal explicitly recognises that victims may need assistance to help defray their arbitration costs and legal fees. Proposals for cost reduction in future international business and human rights arbitrations include:

• Facilitating representation of victims by human rights non-governmental organisations, labour unions and pro bono lawyers.
• Supporting arbitration proceedings in the same way as domestic litigation, through legal aid or the provision of third-party funding.
• The establishment of dedicated grants or the advance of funds (to be repaid from the proceeds of final settlements or arbitral awards) for the arbitration of business and human rights disputes. For instance:
• Private corporations, individuals, foundations and States could contribute to the establishment of a dedicated private trust fund. This would promote better access to justice for victims whilst also contributing to businesses’ corporate social responsibility objectives.
• A dedicated fund could be established by arbitral institutions which adopt the Hague International Business and Human Rights Arbitration Rules. One funding model would be the Financial Assistance Fund established by the Permanent Court of Arbitration, which aims at helping developing countries meet part of the costs involved in international arbitration.
• Centralised funds could be created, for instance within the European Union, by which access to common markets is contingent upon fixed contributions to support victims of businesses’ human rights violations.

In terms of costs and legal expenses allocation, a number of proposals have been put forward to ensure a greater equality of arms. These include:

• Contractual requirements in business and human rights arbitration clauses mandating that a losing company pay the arbitration costs and legal fees of winning victims.
• The granting of additional powers to international business and human rights arbitrators, allowing them to allocate costs and legal fees to winning victims or with consideration of the degree of fault demonstrated.
• Examining the use of fee-shifting arrangements. Traditionally this could mean that the loser pays the winner’s legal fees and costs, which may reduce initial hurdles for victims seeking to litigate but also increases their potential risk and exposure post-judgment. Another idea would be implementing reverse fee shifting, whereby successful victims are awarded their legal fees and costs without winning businesses being afforded the same luxury. The concept has previously been implemented in environmental suits bought by citizens in the United States to help overcome often prohibitive litigation costs.

Given the widespread interest in access to justice for business and human rights victims, there is certainly the potential for means of reducing and reallocating the costs involved in international arbitration proceedings. However, more thought must be given by the working group, the drafters of new arbitration rules and the business and human rights community as a whole to overcome the inequality of arms between well-resourced business corporations and their potential victims.

b.    Transparency of arbitration proceedings

One key factor behind the success of international commercial arbitration is confidentiality. The potential privacy of arbitral proceedings is a distinct motivator for business parties to resort to this means of dispute resolution over more public domestic litigation proceedings. However, when considering the arbitration of business and human rights disputes, the expedient element of arbitral confidentiality is challenged by an inconsistent concern for ensuring transparency in human rights cases. When adjudicating on disputes involving human rights violations of international concern, the public interest lies in having open, transparent proceedings. Additionally, as Justice Scalia recognised in AT&T Mobility LLC v Concepcion, 131 S. Ct. 1740 (2011), confidentiality “becomes more difficult” with class action arbitrations involving absent parties and potentially higher stakes. Accordingly, any rules for arbitrating business and human rights disputes must rethink standard arbitration provisions dictating party privacy, and take account of a need for greater transparency. Indeed, the working group’s proposal identifies as an issue for drafters of new arbitration rules, how “transparent the proceedings and awards should be and how to accommodate any confidentiality concerns that either side might have”.

The working group’s Questions and Answers document identifies greater transparency as a prerequisite for business and human rights arbitration, including the possibility of open proceedings for disputes as well as the potential for publication of human rights arbitral awards. When reassessing arbitral confidentiality, it is suggested that drafters of new arbitration rules will turn to the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules and the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration. These rules recognise “the need for provisions on transparency in the settlement of such treaty-based investor-State disputes to take account of the public interest involved in such arbitrations”, in a similar vein to the public interest in human rights litigation. They also explain that “that rules on transparency in treaty-based investor-State arbitration would contribute significantly to the establishment of a harmonized legal framework for a fair and efficient settlement of international investment disputes, increase transparency and accountability and promote good governance”. Such harmonisation in a legal framework for business and human rights arbitration would similarly augment accountability and promote good governance in the resolution of disputes.

The UNCITRAL Rules increase the public transparency of investor-state arbitration proceedings, notably authorising arbitrators to protect confidential business information and permitting the submission of amicus curiae briefs by third parties. They also require that repositories make all documents, including exhibits and expert reports, available in a timely manner, in the form and language in which they are received. Future rules governing business and human rights disputes might incorporate these principles, as well as considering public entry to, and online streaming of, arbitration hearings and the publication of pleadings and arbitral awards. This will necessitate consultations with international arbitration institutions, which do not routinely create public venues for observation of their proceedings and often decline to publically state the number and kinds of claims with which they deal. It will also be critical that arbitrators are fully informed of the legal and policy issues surrounding confidentiality in business and human rights cases, in order to appropriately resolve disputes arising between parties about privacy provisions.

As Judith Resnik has highlighted, publicity in courts can discipline businesses and governments by making visible how they treat judicial procedures and the claimants against them. Only through such “public processes, one learns whether individuals of all kinds [...] are understood to be persons equally entitled to the forms of procedure offered others to mark their dignity and to accord them respect and fairness”. Public access to the resolution of business and human rights disputes is paramount, and great attention must be paid by drafters to balancing the protection of sensitive business information with the need for transparent arbitral proceedings.

Conclusions

The working group’s proposal for international business and human rights arbitration is not intended to replace any existing means of redress. Its desire is to offer a potentially more effective alternative to current means of dispute resolution, rather than remove access to any existing remedies. Providing parties with a greater range of options to resolve business and human rights disputes will undoubtedly improve their ability to select a method most appropriate to their cause. The availability of international business and human rights arbitration would bring with it many potential advantages, including the universal recognition of arbitral awards, an increase in supply chain responsibility and responsible conflict management. However, the concept still has some way to go before it could succeed in practice. International arbitration proceedings must be heavily adapted, accounting for, amongst other factors, a likely inequality of arms between parties and the need for transparency in human rights proceedings, whilst the existing limitations of international arbitration must be reconsidered. Commentators from business, human rights and arbitration communities have reacted to the proposal with questions and concerns, and the working group, drafters of new arbitration rules and the business and human rights community as a whole face substantial challenges moving from concept to reality. Part 3 of this blog series will further discuss the arbitration of business and human rights disputes through a case study of the Accord on Fire and Building Safety in Bangladesh’s binding arbitration process.

Editor’s note: Constance Kwant is an experienced international lawyer who has worked as in-house senior legal counsel for a top tier international financial institution in both Hong Kong and the Netherlands. She has a specific interest in sustainable business and human rights, including responsible finance.

Introduction

This post aims to outline, briefly analyse and to provide a critical comment in relation to striking a balance between confidentiality and transparency in the procedure followed by the Dutch National Contact Point (‘NCP’) in the Specific instance procedure filed in December 2015 by three former employees (‘Representatives’) on behalf of a group of 168 former employees of Heineken’s subsidiary Bralima SA (‘Bralima’) in Bakavu, located in the eastern part of the Democratic Republic of Congo (‘DRC’).

The case, finalised in August 2017, concerns alleged violations of labour and human rights by Bralima in the period 1999-2003, a period during which the DRC was a highly volatile and conflict-affected country, where the eastern part of the DRC was effectively under control of rebel movement DRC-Goma.The complaint also alleged that Bralima had cooperated with DRC-Goma in a number of ways throughout this period. On the basis of the alleged violations, the Representatives sought financial compensation by filing its notification with the NCP.

Since the allegations were brought forward to the NCP under the OECD Guidelines for Multinational Enterprises, this post will first provide short background information on the OECD Guidelines and the workings of the Dutch NCP, subsequently moving through the proceedings, its outcome, and a brief analysis with a critical note.

The OECD Guidelines for Multinational Enterprises

The Organisation for Economic Co-operation and Development (‘OECD’) finds its roots in the Organisation for European Economic Cooperation (‘OEEC)’, which was established in 1948 to run the US-financed Marshall Plan for the economic reconstruction of the European continent after World War II. Due to the recognition by governments of the interdependence of their economies and OEEC’s success, Canada and the US joined the 18 OEEC member countries by signing the new OECD Convention on 14 December 1960. The OECD was formally established on 30 September 1961, when the Convention entered into force. To date, the OECD has 35 member countries and a number of adhering non-member countries.[1]

The OECD Guidelines for Multinational Enterprises were originally adopted in 1976 as part of the Declaration on International Investment and Multinational Enterprises (‘Guidelines’). These Guidelines are recommendations addressed by governments to multinational enterprises operating in or from adhering countries and provide voluntary principles and standards for responsible business conduct. They are the only multilaterally endorsed and comprehensive code that governments are committed to promoting. Various reviews since then have taken place, in 1979,1982, 1984,1991, 2000 with the most recent update in 2011. The revision of the year 2000 Guidelines provided for further clarification of the roles and responsibilities of the National Contact Points (‘NCPs’) by the incorporation of a section relating to the Procedural Guidance on implementation procedures. [2] Since then, the Guidelines constitute the only international instrument regulating transnational corporations with a built-in grievance mechanism as it provides a mediation and conciliation platform for resolving issues that arise from alleged non-observance of the Guidelines through the NCPs. The most recent update in 2011 not only provides a reinforced procedural guidance to strengthen the role of the NCPs and improve their performance, it also contains an entirely new Chapter on Human Rights in line with the Ruggie Principles.[3]

The National Contact Point of The Netherlands

The Dutch National Contact Point was established in 2000 as an independent entity, responsible for its own procedures and decision making. Its functioning falls under the political responsibility of the Minister for Foreign Trade and Development Cooperation and its Secretariat is hosted by the Ministry of Foreign Affairs. Since its restructuring in 2007, the NCP consists of four independent members and four advisory members, the latter from the Ministries of respectively Social Affairs and Employment, of Economic Affairs, of Foreign Affairs and of Infrastructure and Environment.

The NCP has two core tasks: (i) raising awareness of the Guidelines with businesses, trade unions and non-governmental organisations (‘NGOs’); and (ii) contributing to the resolution of issues that arise from the alleged non-observance of the Guidelines in specific instances. It states “The NCP can assist the involved parties to find a solution in order to avoid further escalation or reputational damage”. This can be done in an informal process, or it may be through a formal notification of a specific instance. [4] Each specific instance procedure with the NCP follows a standard procedure including a confidentiality policy applicable to both the NCP and the parties involved.

The Bralima and Heineken case: specific instance procedure with the Dutch NCP

Background of the case

On 14 December 2015, the NCP received a notification of specific instance in relation to alleged violations of the 2000 Guidelines by Bralima SA (‘Bralima’), Bakavu, Democratic Republic of Congo and its ultimate parent company Heineken N.V. (‘Heineken’), based in Amsterdam, the Netherlands. The notification was filed by three former employees of Heineken’s subsidiary on behalf of a group of 168 former employees who had been made redundant in several rounds in the period 1999-2003.

In its Initial Assessment on the notification regarding the former employees of Bralima versus Bralima and Heineken of 28 June 2016, the NCP summarises the alleged violations under the Guidelines (version 2000) as follows:

• Violations of the human rights of their own workers in the Bralima company in Bakavu, RDC in the period 1999-2003
• Cooperation with the rebel movement of RCD-Goma from 2000-2003 in RDC and the consequences for the workers of Bralima at Bakavu, RDC and their families”
• Illegitimate dismissals of 168 employees of Bralima, Bakavu, RDC between 1999-2003
• Irregularities and deliberate omissions in the individual redundancy schemes of the dismissed worker 
• Serious errors concerning mass dismissals in the period 1999-2003 contrary to the Congolese law by Bralima
• Taking the above into account Bralima and Heineken should pay two hundred million (200.000.000) euros to the former employees and their families as a compensation for the damages

In relation to the alleged violations of the Guidelines, it is argued that in particular the following Chapters of the Guidelines were violated: Chapter I. (Concept and Principles), Chapter II. (General Policies, paragraphs 1, 2, 5, 6, 9, 10, 11), Chapter IV. (Employment and Industrial Relations, paragraph 6) and Chapter VI. (Combating Bribery, paragraph 6). [5]

The NCP Procedure from receipt of the notification until the Initial Assessment

The NCP acknowledged receipt of the notification on 18 December 2015 and informed Heineken. The following steps were subsequently taken:

1. 21 January 2016: the NCP spoke with the Representatives by phone, further communication (questions and answers) took place via email;
2. 10 February 2016: the NCP had a meeting with Heineken during which Heineken asked for and was granted two weeks to determine its position;
3. 10 February 2016: the NCP received an initial response from Heineken on the notification that its Code of Business Conduct and its underlying policies (including on Employees and Human Rights, Bribery and Improper Advantages and the Supplier Code) and other instruments apply to all companies within the Heineken Group, including Bralima, in more than 70 countries in which the companies of the Heineken Group operate; that Heineken indirectly holds 95% of the shares in Bralima; and Bralima stayed in the DRC because the business case continued to be valid.
4. End of February 2016: the NCP supported Heineken’s proposal to first have the Representatives hold a meeting with the management of Bralima without interference of the NCP;
5. 13 April 2016: the meeting was held in Bakavu, DRC. Both parties informed the NCP that the meeting had not divulged anything new;
6. 31 May 2016: draft version of NCP’s initial assessment was sent to the parties with the request to submit any comments within two weeks;
7. 28 June 2016: the NCP published its initial assessment on its website.

The Initial Assessment of the specific instance by the NCP

Since the DRC is not a member of the OECD, it has no National Contact Point. According to the NCP’s notification policy, in such case, a notice of specific instance can be submitted to the NCP where the multinational enterprise involved is seated.

The NCP, based on this, considered itself competent to offer its good offices and to initiate a dialogue since Heineken is based in Amsterdam. Both parties accepted NCP’s good offices and requested the appointment of a third-party mediator. Also, an expert in Congolese law was appointed. According to the Initial Assessment, Heineken stated that it “is of the opinion that there is no breach of the OECD Guidelines, […..] concerning the dismissals in the period 1999-2003 the existing procedures have been followed carefully,[…..] it has always been of the opinion that it was a case for Bralima, but it did follow the case, […..]  the specific instance procedure is a forward looking process in which the NCP may try to verify the facts and organise interaction between the parties aimed at addressing the issues raised”.[6] The NCP concluded that in accordance with the Guidelines (2000), and its own Specific Instance Procedure, the notification merited further examination. Thereafter, parties entered into agreements on confidentiality and transparency on mediation and further examination while in the process, in accordance with the NCP's procedure.[7]

In the course of the procedure after the publication of the NCP’s Initial Assessment of 28 June 2016, several meetings were held in the period up to 18 July 2017. In January 2017, the parties agreed to the framework surrounding the dialogue. To further facilitate the dialogue and mediation process, shortly thereafter, meetings were also held at the Dutch embassies in respectively Kampala, Uganda, and Paris, France. These meetings were monitored by the NCP. In Kampala, the meeting between parties took place with the mediator, in Paris, with the externally appointed expert in Congolese labour law.^[8]

To further facilitate the dialogue and mediation process, shortly thereafter, meetings were also held at the Dutch embassies in respectively Kampala, Uganda, and Paris, France. These meetings were monitored by the NCP. In Kampala, the meeting between parties took place with the mediator, in Paris, with the externally appointed expert in Congolese labour law.^[9]

The NCP’s Final Statement and the scope of application of the Guidelines

According to the NCP’s Final Statement on the notification in Former employees Bralima vs Bralima and Heineken of 18 August 2017, the Guidelines (2000) equally apply to Heineken, not just Bralima, on the basis of Chapter II. General Policies, paragraph 1 of the Guidelines (2000).[10]

In this context, the NCP noted: “the Guidelines (2000) do not mention enterprise groups”. Based on Chapter II. paragraph 1 however, it concluded that the Guidelines do apply because Heineken held (and still holds) indirectly 95% of the shares in Bralima, implying a very strong business relationship.

The NCP’s recommendations

In general terms, the NCP encourages Heineken to draw up a policy, including guidelines as to how Heineken is to conduct business and operate in volatile and conflict-affected areas. In addition, according to the NCP, the specific instance procedure highlights the need to ensure ongoing internal analysis of Heineken's existing policies and processes not only in the context of the Guidelines (2011) but also in relation to the UN Guiding Principles on Business and Human Rights (‘Ruggie Principles’).

The specific Recommendations adopted by the NCP relate to Chapter IV. (Employment and Industrial Relations), paragraph 3 of the Guidelines (2000) and state that Heineken is to “provide information to employees and their representatives which enables them to obtain a true and fair view of the performance of the entity or, where appropriate, the enterprise as a whole”. [11] Moreover, based on this and on Chapter IV. (Employment and Industrial Relations), paragraph 6 of the Guidelines (2000) the NCP recommends:

1. transparency and communication to employees be part of enterprises’ policies for dealing with conflict settings; and
2. the handling of complaints should be monitored and evaluated within company groups as part of applying corporate governance principles and practices throughout the group.[12]

Subsequently, the NCP concluded on the basis of its monitoring role that “all parties have participated in a proper and fair way”.[13] In addition, it stressed the useful support of an external third party mediator, the involvement of an external expert on Congolese law and the Dutch embassies in Kampala and Paris having facilitated meetings outside the DRC. [14] The parties accepted the offer from the NCP to conduct a dialogue on the implementation of its recommendations, scheduled for the summer of 2018.[15] However, the final statement indicates also that both parties wanted to keep confidentiality on the agreement/outcome and “the NCP regrets this”.^[16]

Comments: Transparency matters

The NCP has been transparent in publishing the procedural steps it has taken in both its Initial Assessment and its Final Statement. Nevertheless, we face a total lack of transparency on what was finally agreed upon between the former employees of Bralima and Heineken. This is in itself a missed opportunity to provide a learning curve for the Investment Committee of the OECD, governments, multinational enterprises and civil society. This lack of transparency regarding the actual outcome of the Bralima and Heineken procedure leads to uncertainty on what agreements have or have not been reached and seems to severely contradict the spirit and possibly even undermine the effectiveness of the OECD Guidelines.

In order to ensure that all NCPs operate in a comparable way, the Guidelines (2000) incorporated the concept of “functional equivalence” in the Procedural Guidance for NCPs, meaning that in order to achieve comparable functioning, the Guidelines provide for so-called Core Criteria for NCPs which relate to Visibility, Accessibility,Transparency and Accountability, based on which the NCP accordingly established its own Core Values.

However, as far as the Core criterion Transparency is concerned, the Guidelines state that “outcomes will be transparent unless preserving confidentiality is in the best interests of effective implementation of the Guidelines”.[17] It is remarkable that the NCP itself regretted that both parties wanted to keep confidentiality on the outcome of the mediation, while not motivating its decision to ‘allow’ for confidentiality in the outcome of this case. It seems that the actual settlement of the dispute prevailed over ‘Transparency’ as one of the key Core Values under the OECD Guidelines. Did the “effective implementation” of the Guidelines with regards to Heineken truly require this lack of transparency regarding the final settlement? Or, isn’t it rather otherwise, that the effective implementation of the Guidelines, viewed from a general point of view, requires transparency as a default solution, with limited and strict exceptions that need to be properly justified?

[1] See http://www.oecd.org/about/membersandpartners/. In addition, the Supplementary Protocol No.1 to the OECD Convention the signatories to the Convention agreed that the European Commission participates in the work of the OECD. The European Commission however does not have the right to vote and does not officially take part in the adoption of legal instruments, http://www.oecd.org/general/supplementaryprotocolno1totheconventionontheoecd.htm.

[2] See http://www.oecd.org/corporate/mne/1922428.pdf, at page 33-35.

[3] On 16 June 2011, the United Nations Human Rights Council unanimously endorsed the Guiding Principles for Business and Human Rights: ‘Implementing the United Nations “Protect, Respect and Remedy” Framework’, which seek to provide a global standard for all businesses in preventing and addressing the risk of adverse human rights impact linked to business activity.

[4] On specific instances, see https://www.oecdguidelines.nl/notifications/submitting-a-specific-instance.

[5] See the NCP’s Initial Assessment, 28 June 2016, at page 2-3.

[6] Ibid, at page 4.

[7] Ibid, at page 5.

[8] See NCP, Final Statement, 18 August 2017, at page 4.

[9] Ibid.

[10] This provision states: “…..[…..] Enterprises should…[…] ‘Encourage, where practicable, business partners, including suppliers and sub-contractors, to apply principles of corporate conduct compatible with the Guidelines’”.

[11] See the 2000 OECD Guidelines for Multinational Enterprises, at page 17.

[12] Heineken does have a Speak Up Policy as part of its Code of Business Framework, see https://secure.ethicspoint.com/domain/media/en/gui/25903/index.html.

[13] See NCP, Final Statement, 18 August 2017, at page 6, paragraph 10.

[14] Ibid, paragraphs 13-14.

[15] Ibid, at page 7.

[16] Ibid, at page 5, paragraph 5.

[17] Ibid, at page 57, paragraph 2.