Question 6: Arbitration and Human Rights

To: CEO, Coffee4U

From: General Counsel

Date: 11th May 2020

Respected Madam,

Corporations that operate in the modern business ecosystem are required to maintain a certain degree of responsibility in terms of upholding human rights within their business processes. It has largely taken place as several large scales organisations have come under fire for failing to uphold basic human rights within their overseas operations including the likes of Marks & Spencer and ASOS.1 However, the historical perspective of international law in terms of how it applies to business organisations was largely limited and the scope and extent were restricted to nations and their relations with other national entities. Gradually over the years, the operations of business entities have come under the purview of international law along with several armed groups, individuals, non-governmental agencies and others. A report prepared by the Amnesty International put forward that within the 100 largest economies globally, 51 of them were business organisations.2 The 2011 adoption of the UN Guiding Principles on Business and Human Rights has also been instrumental in this context. It established how the states and the signatories of the United Nations comprised of the legal obligation to protect human rights, especially in the context of corporations and business entities that operate from within their jurisdiction. 

Due diligence and extensive grievance mechanisms are strictly warranted for organisations that have an international presence. The best practices in this regard impose a certain degree of obligation on both the corporation as well as the state to uphold human rights and facilitate adequate compensation for the victim in the case of a violation or failure to safeguard the rights. However, it is also important to state that the legal liability for corporations has been relatively restricted in terms of the number of cases that have come up in the past few decades. Statutory enactments by local and national governments have instead brought about an improved sense of clarity regarding the guidelines that corporations should follow while engaging in business functions in overseas territories. Considering how Coffe4U is predominantly headquartered and registered within the United Kingdom, the Modern Slavery Act 2015 would be applicable. Provisions within the enactment warrant corporations with annual turnover figures of £36 million to engage in fair reporting regarding the preventive measures and the steps they have taken to prevent any form of slavery or trafficking of humans irrespective of the geographic location of the supply chain activity.4 It would also be an important standing that Coffee4U could undertake considering its global corporate social responsibility in terms of reporting on the steps taken to ethically treat its overseas workers and not engage in any form of exploitation.

The May 2013 Accord on Fire and Building Safety in Bangladesh is of prime importance in this regard. 5 It was a five-year independent agreement between popular brands and the trade unions of the readymade garment industry within Bangladesh that strived to improve the safety for the workers involved within the industry. A similar Transition Accord was signed in 2018 and included well over 20 brands that codified their commitment towards upholding the safety of their workers located in Bangladesh. Safety remediation was the key principle within the Accord and it allowed for a progressive developmental phase within the industry while improving the corporate appeal of the brands involved over time. Safety committees and training programs were extensively relied upon within the Accord along with the facilitation of extensive complaint mechanism systems and protection of the rights of the workers. The International Labour Organisation was the neutral chair within the Accord, and considering the scale of the operations of Coffee4U, it could be recommended that a similar strategy is adopted to prevent future discrepancies in the context of failure to safeguard the rights of the overseas workers.

The best practices for companies in this regard have since developed to include comprehensive risk identification and management strategies that have been implemented on an international scale. While international investment has for long been considered as a means to improve the competitive advantage for corporations in the context of cheaper labour markets and larger workforces, its conjuncture with the human rights of the workers involved has predominantly been clouded. The emergence of International Investment Law both in terms of national treaties along with the development of internationally binding agreements between nations that are both bilateral and multilateral have largely focused on the incorporation of human rights as one of the key fundamentals.6 Human rights impact assessments have widely become popular as a part of the soft impressions of the laws along with their underlying connotations and must be upheld equitably by the operations of Coffee4U in territories beyond the United Kingdom. The concept of a socially responsible investor has also come to the forefront, especially when factoring how large scale multinational corporations dominate a large portion of the world economy both in terms of the economic perspective as well as the labour perspective.

The consciousness within the international community has progressively grown over the years in terms of how international investments into overseas markets inherently comprise of an ethical perspective in terms of upholding human rights. Situations of forced labour, human trafficking and enhancing the profitability within the global supply chain through unfair work practises having steadily come to the forefront. Both governmental and individual developments have predominantly aimed at improving the collaboration between the corporation and their overseas partners through a greater emphasis on harmony and sound work ethics with a focus on human rights.7 The aspect of exiting the markets as a means of solving the problem has also been shunned upon to a large extent, especially since the Bangladesh collapse of the Rana Plaza that led to several globally reputed markets shifting their production facilities elsewhere. Contradictorily, the collapse also led to business engaging in certification schemes and several work standards for the contractors and sub-contractors as a means to sustainably develop the markets and ensure that the global supply chain remains both profitable and safe.8 Supply chain transparency and accountability are key fundamentals in this regard, and it would be strongly recommended that Coffee4U engages in the same in the most holistic manner possible.

Another important area of discussion in this regard is the development process that led to the establishment of human rights within the context of international foreign investment. It is essentially without controversy that the concept of international investment did not come into existence simply based on the governance oh human rights. The large presence of historical antecedents that were aimed at safeguarding the investors and more importantly, their investments, bear testimony to the statement made above. While the concept of international investment and human rights maintenance has come to be interlinked in the modern era, access to justice for overseas workers has been gradually developing. The development of minimum standards of treatment, however, has been acknowledged globally in terms of improving the conditions of the workers overseas and ensuring that their rights are upheld. However, it would be important to determine the basis of the establishment of MSTs in terms of how they became popular and what led to their establishment. The case between “L. F. H. Neer and Pauline Neer (U.S.A.) v. the United Mexican States” was the founding stone and was by no means associated with the concept of human rights and its protection within international investments.9 Instead, the key facet within the case related to criminal matters between private parties as opposed to the protection of property and human rights.

International developments that have taken place in the current era have primarily strived to correlate the concept of safeguarding both the investor as well as their overseas partners in a relatively equitable manner. The global business ecosystem has increasingly become complex, thus leading to several unique and relatively new challenges for both the investors as well as the concept of safeguarding human rights in overseas territories.10 The emergence of developing countries becoming popular as labour markets have only added to the complications both in terms of the international regulations and standards along with the domestic laws that facilitate protection. Litigation risks have certainly increased, especially with the rise of social media and how it has been able to provide a voice for those previously unheard. It has naturally become vital for corporations that operate internationally to build a culture of trust and ethics as well as ensure the sound development of the corporate brand image. A proactive approach is certainly warranted to ensure that the risk of litigation internationally is minimised to the fullest possible extent along with eliminating the potential of hindrances in the operational flows due to the same.

The International Court of Justice or the ICJ has also been instrumental in forwarding the initiative of entailing human rights within international investments, especially in the wake of the numerous scenarios involving violation and failure to uphold. Several cases that have come up internationally have involved regions where the domestic legal systems along with the judicial and political institutions are relatively weak. Poor regulation of the business industries and a lack of formalisation have led to sever instances of human rights violations and have even led to the imposition of criminal charges due to the gravity of the offences. The ICJ has also relied on several measures taken through the United Nations aimed at improving the scope and coverage of both national and international law along with the setting of standards of business behaviour that could be deemed acceptable within the international community.11 It has also led to the cumulative establishment of multiple justice and accountability mechanisms, where human rights and their safeguarding within the commercial perspective have been focused on to ensure that the system remains functional and transparent to the fullest possible extent. The ICJ project on improving the grievance mechanisms for business-related rights has certainly led to some area of improvement while enhancing the liability of corporations to engage in safeguarding and protection simultaneously.

In terms of the legal perspective relating to remedial measures and settling of disputes, arbitration has certainly been on the forefront over the past few decades. The Vienna Convention on the Law of Treaties or the VCLT has largely been the guiding stone in this regard. Article 31(3) (c) of the VCLT has prevented the fragmentation of international law based on the geographic regions of the parties within a dispute that is relevant internationally.12 The jurisdiction of the tribunal has often come into question, especially when the implications of the dispute are relatively critical and tend to comprise of an international lash back. However, several cases have been successfully decided to utilise relevant articles, with some even extending on to the purview of the ICJ.13 One of the most prominent cases in this regard relates to the judgement passed by the international tribunal in “Hesham Talaat M. AlWarraq v Indonesia.14” Fair and equitable treatment of the workers within the Indonesian financial services sector was the key fundamental within the case, and the tribunal relied on several international law aspects and provisions within treaties to uphold the rights of the individuals involved. While less harmonious ways of interaction between international law and human rights have been present over the years, the recent developments certainly warrant organisation to maintain a strong emphasis on human rights and their safeguarding in overseas territories of operations. 15

It would, therefore, be recommended that Coffee4U focuses on strong reporting and assessment measures, especially in the context of maintaining the human rights of its workers in international regions. While arbitration and the scope of international litigation have certainly improved over the years, recent judgements have certainly institutionalised the necessity to ensure equitable treatment of the international workers based on the minimum standards and acceptable codes of conduct.

References for Arbitration and Human Rights

Statutes

'Modern Slavery Act 2015' (Legislation.gov.uk, 2020) <http://www.legislation.gov.uk/ukpga/2015/30/contents/enacted> accessed 11 May 2020

Websites

(Repository.law.umich.edu, 2020) <https://repository.law.umich.edu/cgi/viewcontent.cgi?article=1113&context=mjil> accessed 11 May 2020

'Everything You Need To Know About Human Rights And Corporate Accountability' (Amnesty.org, 2020) <https://www.amnesty.org/en/what-we-do/corporate-accountability/> accessed 11 May 2020

Reporters T, 'M&S And ASOS Among British Retailers Found Employing Child Refugees In Factories' (The Telegraph, 2020) <https://www.telegraph.co.uk/news/2016/10/24/ms-and-asos-among-british-retailers-found-employing-child-refuge/> accessed 11 May 2020

Governmental publications

(Legal.un.org, 2020) <https://legal.un.org/riaa/cases/vol_IV/60-66.pdf> accessed 11 May 2020

(Ohchr.org, 2020) <https://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf> accessed 11 May 2020

'Al Warraq V. Indonesia | Investment Dispute Settlement Navigator | UNCTAD Investment Policy Hub' (Investmentpolicy.unctad.org, 2020) <https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/426/al-warraq-v-indonesia> accessed 11 May 2020

'Business And Human Rights' (International Commission of Jurists, 2020) <https://www.icj.org/themes/business-and-human-rights/> accessed 11 May 2020

'The Bangladesh Accord On Fire And Building Safety' (The Bangladesh Accord, 2020) <https://bangladeshaccord.org/> accessed 11 May 2020

Journals

Adeleke F, 'Human Rights And International Investment Arbitration' (2016) 32 South African Journal on Human Rights

Boone Barrera F, ‘Property Rights as Human Rights in International Investment Arbitration: A Critical Approach’ (2018) 8 Reforming International Investment Law

Fasterling B, 'Human Rights Due Diligence As Risk Management: Social Risk Versus Human Rights Risk' (2016) 2 Business and Human Rights Journal

Methven O'Brien C, and Dhanarajan S, 'The Corporate Responsibility To Respect Human Rights: A Status Review' (2016) 29 Accounting, Auditing & Accountability Journal

Radi Y, ‘Realizing human rights in investment treaty arbitration: A perspective from within the international investment law toolbox.’ (2011) NCJ Int'l L. & Com. Reg. 37

Steininger S, 'What's Human Rights Got To Do With It? An Empirical Analysis Of Human Rights References In Investment Arbitration' (2017) 31 Leiden Journal of International Law

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