The Revised Draft: Access to judicial remedy for victims of multinationals' abuse
This commentary is part of the Reflections on the Revised Draft Treaty blog series. Our Debate the Treaty Blog highlights a diverse range of voices from across the globe on the proposed legally binding treaty on business and human rights, which we believe is complementary to the implementation of the UN Guiding Principles.
A stated purpose of the July 2019 Revised Draft of the Legally Binding Instrument is to “ensure effective access to justice and remedy for victims of human rights violations and abuses in the context of business activities”. While in certain respects the Revised Draft represents an improvement over the Zero Draft, significant gaps and ambiguities in the Revised Draft will, in combination, potentially prejudice victims’ ability to secure effective legal representation, especially in complex, resource-intensive mass claims against multinationals, which are precisely the type of cases where such representation is critical.
To highlight some of the positives:
- The removal of power to states to exempt “small and medium-sized businesses” from the ambit of the instrument, and to replace it with “incentives and other measures to facilitate compliance” by such businesses, is welcome. Some of the most egregious examples of human rights abuses by business involve small businesses. I refer, for example, to the mercury poisoning of South African workers by Thor Chemicals and the abuse of Peruvian environmental protesters by Monterrico Metals.
- Under Article 6.5 of the Revised Draft, states may require financial guarantees/insurance to cover claims. Insolvency, financial restructuring and manoeuvrings of defendants have been a regular feature and injustice to victims involved in multinational litigation. I refer, for example, to cases against Cape Plc and most recently against Vedanta.
In my earlier blog on the 2018 Zero Draft, I referred to key barriers to access to justice for victims, which have been factors in multinational litigation in which my firm has been involved over the past 25 years, and most of which are specifically referred to in Pillar III of the UN Guiding Principles on Business and Human Rights (UNGPs). In this regard the Revised Draft raises various concerns, including:
- As noted by Gabriela Quijano in her blog on the Revised Draft, Article 6.6 seems to depend on a contractual relationship between the corporate defendant and the legal entity whose operations caused the harm, thereby potentially adding an additional requirement in comparison with the human rights due diligence duty in the UNGPs and the common law tort duty of care. Thus, the parent company duty of care in UK multinational cases has essentially been based on the actual control, or ability to control, functions at local subsidiary company operations, deficiencies in which the parent caused or contributed to harm and the parent’s actual or constructive knowledge of the risk of harm. Whether or not there was a contractual relationship between the parent and the subsidiary has not been the issue.
- Whereas the Zero Draft specifically requires states to guarantee the right of victims to pursue their claims as a group, the Revised Draft contains no such provision. As I previously indicated, the right of victims to pursue claims collectively as a group, including as opt-out class actions, is crucial in enabling mass claims to be litigated in a cost-effective manner, which protects victims’ claims against the effect of domestic statutes of limitations and which is financially viable for victim and their lawyers.
- Article 12.1 of the Revised Draft retains the provision that states “shall carry out their obligations under this (Legally Binding Instrument) in a manner consistent with the principles of sovereign equality and territorial integrity of states and that of non-intervention in the domestic affairs of other states”. In the present context, this could be interpreted as an invitation to apply the forum non conveniens doctrine, applied by courts in the United States, Canada and Australia, and formerly in the UK to decline jurisdiction on the grounds that the local courts are a more appropriate venue, which has so tragically plagued cases against multinationals such as the Cape Plc and Union Carbide in the Bhopal case. Consequently, an express provision prohibiting forum non conveniens would seem wise.
The legal, procedural and practical barriers to justice are interrelated and additive in terms of risk. The more barriers are removed, the more likely it is that victims will secure legal representation. As explained in more detail in my previous blog, the legal and factual complexity and novelty of these cases, and the might of the opposition, mean that victims require specialist legal representation and technical experts to pursue such cases, which are invariably very costly and resource-intensive and have uncertain prospects of success.
The solution to this fundamental barrier in the Revised Draft (Article 13.7) appears to be the establishment of an International Fund to provide legal and financial aid to victims. However, a provision that states “shall define and establish the relevant provisions for the functioning of the fund” is far too vague to give any confidence that this would translate into a legal fund sufficient for complex and protracted litigation against well-resourced multinationals. Indeed, given the scale of the fund that would be required to ensure anything like equality of arms, this provision seems completely unrealistic, especially given that public funding of legal representation for citizens of states, even in criminal cases, is so stretched or non-existent.
Realistically, victims will be dependent on lawyers willing to act on a contingency basis, and sometimes, where the damages are sufficiently high, with the backing of third party litigation funders. For that system to work, given the risks – in terms of the cash flow burden, uncertain duration of litigation and the risk of losing and not being paid – the financial disincentives against victims’ lawyers acting need to be countered, by enabling full costs recovery if a case succeeds. Backing from litigation funders can provide a significant boost. But these are hard-nosed commercial organisations whose involvement depends on high overall damages from which they can secure a significant return on their investment and relatively modest litigation risks (i.e. barriers).
Richard Meeran is a partner at Leigh Day