The growing importance of human rights in the conduct of business provides lawyers with both challenges and opportunities. Marialuisa Taddia reports
John Grisham’s 1991 novel The Firm conjured up an image of business lawyers as ruthless and unscrupulous, intent on facilitating rather than counselling against the dubious activities of clients.
A quarter of a century later, such fiction would perhaps appear less credible. Nowadays, as part of a global initiative, not only do lawyers have a duty to report suspicious client activity that may indicate money laundering and tax evasion, they are also under increasing pressure from governments and civil society groups to advise and persuade business clients to respect and protect human rights. And they are at increased risk of being named and shamed if they do not.
This new emphasis on practice stems from the United Nations Guiding Principles on Business and Human Rights (UNGPs), developed by UN special representative and Harvard professor John Ruggie, and endorsed in June 2011 by the UN Human Rights Council. They implement Ruggie’s ‘protect, respect and remedy’ framework, which emphasises a corporate responsibility to respect human rights. Under the UNGPs, business enterprises ‘should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved’.
Lawyers have a major role to play, not just because they are expected to advise clients on respecting human rights, but also because they should implement the UNGPs within their own businesses.
Recognising the opportunities and challenges this represents, last October the International Bar Association (IBA) issued general guidance on business and human rights for law societies and bar associations. A practical guide for business lawyers will follow in May – and both guidelines incorporate much of the Law Society’s thinking (see box, p16).
‘It’s partly an educative process,’ says Jane Ellis, head of the legal projects team at the IBA. ‘We need to have a long-term approach to how we implement change.’
Why? One reason is ‘a lack of understanding and appreciation of how the guiding principles apply to legal practice’, explains John Sherman, secretary, general counsel and senior adviser to Shift, a New York-based independent non-profit centre for business and human rights (the Shift team was involved in shaping and writing the UNGPs and Ruggie is chair of its board of trustees). The principles apply to many areas of business legal practice including corporate governance, reporting and disclosure, litigation, dispute resolution, contracts and agreements.
Another reason is that the UNGPs are not binding – at least not yet. The UN Human Rights Council has set up a working group to produce an international legally binding instrument on transnational corporations and other business enterprises. ‘There is a lot in the guiding principles that relate to corporate responsibility to respect human rights that isn’t mandated,’ Sherman says. ‘And lawyers have a tough time, generically, dealing with [issues] outside the boundaries of hard law.’
However, since 2011 hundreds of corporations have used the UN global standard to benchmark their corporate social responsibility (CSR) policies, and they expect each part of the supply chain to do the same. Robert Heslett, chair of the Law Society’s working group on business and human rights, says: ‘Clients, themselves with an already well-developed internal policy on human rights respect, now often require compliance with their rules as a condition of retainer.’
Ellis says: ‘From a PR perspective, it is actually to a law firm’s advantage to be able to promote themselves as having implemented the business and human rights framework. It’s a way of being more attractive to potential clients.’
Business clients are influencing legal practice in other ways. ‘In-house legal departments have become large and sophisticated,’ Sherman says. ‘Their talent is equal, and in some cases superior, to outside counsel. They tend to reflect the needs and desires of the companies they work for. Companies increasingly recognise that respect for human rights is material to their business and expect their internal counsel to advise them on this issue.’ This means providing strategic advice on top of technical advice, and it is ‘setting the mark’ for outside counsel.
There is also potential reputational damage to consider. Covert filming of lawyers in the US by an anti-corruption NGO has recently resulted in allegations that the lawyers recorded were willing to advise on the secret transfer of funds to the US to purchase assets. The lawyers concerned have either refused to comment or deny involvement in any illegality, and have pointed out that they did not accept a client or instructions as a result of the meeting. But the alleged exposé has highlighted the danger inherent in the public airing of such disputed matters.
Ellis says: ‘The whole global attitude to human rights has changed profoundly over the last 10 to 15 years, and social media contributes to that.’
Some conduct may be seen as morally wrong, even if it does not break the law – witness the examples of Amazon, Google and Starbucks, all of which were targeted in social media for allegedly avoiding UK taxes.
In getting up to speed with business and human rights standards, size is significant. ‘I suspect the greatest gaps in knowledge are not among the big firms, but in the smaller ones,’ says Julianne Hughes-Jennett, a partner at Hogan Lovells’ international arbitration and litigation practices. ‘As a business we are increasingly comfortable with the UNGPs and how we manage our client relationships, mainly because we act for major international corporations. They are often ahead of us in terms of knowledge and implementation of the principles.’
The UNGPs have strongly influenced other international standards, including the OECD Guidelines for Multinational Enterprises, the Equator Principles (standards that banks should apply to projects they fund) and the UN Global Compact, as well as national legislation. The 2013 amendments to the 2006 UK Companies Act require directors to include information about human rights issues in their strategic report; and under the UK Modern Slavery Act 2015 businesses must conduct human rights due diligence to tackle slavery and trafficking in supply chains.
The growing convergence between conduct of business and the observance of human rights is generating new business for firms. Clifford Chance, Herbert Smith Freehills, Norton Rose Fulbright and Hogan Lovells are among international firms that now have dedicated, multi-jurisdictional business and human rights teams to help clients identify and mitigate the human rights risks that may be associated with their activities, operations and relationships.
At Hogan Lovells the practice consists of a team of lawyers drawn from various legal disciplines. Hughes-Jennett, who is part of the team, says: ‘We don’t sit in a purely standalone business and human rights practice. We come together as a group to market ourselves in that way and offer services to clients.’
To raise the practice’s profile, last month Hogan Lovells hosted a panel event, chaired by broadcaster Jon Snow, to discuss whether human rights are good for business. It will also roll out training on business and human rights for all lawyers globally following an initial online course in December. Mandatory human rights training has also been introduced for all Clifford Chance lawyers and some members of its business services team.
Some firms set the ball rolling well before the advent of the UNGPs, which are based on International Human Rights Treaty Obligations, the International Bill of Human Rights and core conventions of the International Labour Organisation.
Norton Rose Fulbright, which has long advised the extractive sector in emerging markets such as Africa, introduced its first human rights training programme for fee-earners more than 10 years ago. ‘If you look at the extractive industries, those were probably at the forefront of exposure to these issues because, to begin with, they didn’t get it right,’ says partner Robin Brooks. ‘We were active in energy and extractive from the start; hence we introduced the training so long ago.’ In energy and natural resources, businesses must consider land rights and indigenous peoples’ rights, and cooperation with host states with poor human rights records.
More recently, Norton Rose Fulbright introduced a Business and Human Rights QuickCheck – a tool which allows the firm to do ‘a very quick desktop risk analysis of how business clients are positioned vis-a-vis current standards’, partner Milana Chamberlain explains.
Sherman, who has been working with law firms, national bars and the IBA on implementing the UNGPs for the practice of law, says firms should build capacity in this area through their pro bono services: ‘Look at the work you are doing in pro bono and see if you can develop the capacity of your lawyers in this field, then think how you can translate that into billable work.’
Sherman concedes that ‘law firms are under pressure in a market where in-house clients are very demanding’, but argues there is still room for firms able to provide ‘extra insights’.
Developing this area of expertise can also pay dividends in recruitment. Sherman explains: ‘The ability to advise on human rights risks and address them in a proactive way is valuable not only for the client but also for the firm and its employees, particularly younger lawyers who want to work for firms who make a difference.’
There are also financial benefits. Stéphane Brabant, a projects lawyer with a focus on Africa and co-head of Herbert Smith Freehills’ business and human rights group, recently advised a client on a takeover in Africa. One key aspect of the work was to ensure ‘full’ human rights compliance, which generated extra billing of more than €100,000.
As business enterprises, law firms should also respect human rights when dealing with employees, suppliers and clients. This means conducting human rights due diligence processes before signing up clients and suppliers; publishing high-level human rights policies; and producing CSR reports in accordance with the Global Reporting Initiative (GRI) Guidelines, which contain key performance indicators relating to human rights.
As Sherman says: ‘Law firms as business enterprises have lagged behind their business client base in this regard. It is less true than it was in 2011, but it is still largely true.’ Progress can be faster in some areas than others.
‘Law firms are probably more transparent about the efforts they are undertaking with their employees because younger lawyers are quite sensitive to these issues,’ Sherman adds. ‘If you look at law firms’ sustainability reports, you see a lot of references to diversity – less so to their supply chain.’
The UK has led the way with regard to the UN’s guiding principles.
In 2013, the government became the first to release a national action plan to implement the principles, while the Law Society was the first legal professional body in the world to consider their effect on member lawyers. Chancery Lane set up an external Business and Human Rights Advisory Group to consider the implications of the UNGPs for solicitors for advisory and other legal services provided to clients; the management of solicitors firms as business enterprises; and solicitors’ professional duties and responsibilities.
In 2014, the advisory group recommended that firms include in their business plan a requirement to respect human rights and implement due diligence procedures. The Solicitors Regulation Authority was also called upon to incorporate an understanding of the UNGPs on business and human rights in legal training. And the group recommended that the Society consult its members, including in-house lawyers and firms of all sizes, ahead of issuing guidance for the profession.
This consultation was carried out in 2015 and the Society will soon publish a practice note.
Robert Heslett (pictured), chair of the advisory group on business and human rights, says the note will inform solicitors of the ‘societal shift’ that businesses have a responsibility to respect human rights, recommending firms adopt the UNGPs in governing their business. ‘The rules under which firms operate, be they from the SRA or made under statute in terms of employment or health and safety, should make this easy,’ he says.
‘As business enterprises firms must exercise due diligence in determining with whom they do business and if suppliers of services breach human rights,’ says Heslett, who is also the Law Society’s IBA representative and a member of the IBA working party on UNGPs.
But the discussion on the scope of the solicitor’s duty to advise and the division between hard and soft law is a ‘more complex’ issue, according to Heslett: ‘In the UK, companies are subject to increased reporting requirements under the Companies Act and the same under the Modern Slavery Act. So “soft law” is leading to “hard law” year on year.
‘SRA guidelines and the law on the scope of a solicitor’s duties to clients may well require advice on soft law and, for example, the effect of non-compliance with the UNGPs or the OECD rules or the Equator rules, all of which are in place to militate against breach of human rights.’
That does not apply across the board. In its 2015 corporate responsibility report Clifford Chance said that its supply chain was one of three areas [the others being employees and clients] in which the magic circle firm expected ‘the most salient’ human rights issues to arise, but that due diligence undertaken with its procurement and HR team indicated that ‘the firm already has robust policies and processes to address potential human rights concerns that could arise in these areas of our operations’. The firm adopted a human rights policy in 2013 and has reported against the GRI framework since its 2011 corporate responsibility report, after becoming a signatory of the UN Global Compact alongside other firms including Hogan Lovells, Norton Rose Fulbright and Herbert Smith Freehills.
Furthermore, Clifford Chance’s clearance centre team, which reviews every new client and potential mandate, has been ‘specifically trained to take a more structured approach to understanding any potential human rights impacts of its client relationship’.
Elsewhere, Hogan Lovells’ compliance team has integrated human rights concerns into ‘know-your-client’ conflict searches which are periodically updated, says Hughes-Jennett.
NRF’s Chamberlain says: ‘We fully understand the three main areas which are relevant to us – employees, supply chains and clients – and are in the middle of an extensive due diligence programme. We are mapping everything in accordance with the UNGPs and gearing towards setting out a policy.’
Herbert Smith Freehills is also working on a human rights policy, Brabant says: ‘The IBA’s practical guide for business lawyers will be a useful tool for law firms, which are putting together a [human rights] policy.’ Brabant is a member of the IBA Business and Human Rights Working Group that is finalising the guide and published the IBA guidance for bar associations.
Another challenge for lawyers in this context relates to so-called ‘leverage’, which the UNGPs say is ‘considered to exist where the enterprise has the ability to effect change in the wrongful practices of an entity that causes a harm’. They should use this influence to encourage clients to refrain from engaging in conduct that results in human rights harms, to mitigate the risk that any further impact continues or recurs, and to remedy its contribution to the impact.
‘How the UNGPs work is that you have to think about how you minimise your impact in terms of adverse human rights, and it is all a question of leverage,’ says Hughes-Jennett.
But, as Clifford Chance partner Rae Lindsay notes: ‘There is still a lot of controversy as to what the responsibility means in terms of the discharge of a client advisory role if [the lawyer] is not specifically mandated to deal with these issues by the client, and then how it factors into advice.
‘There has to be debate around the concept of leverage and what it means for lawyers.’
In its guidance, the IBA suggests that bar associations may ‘wish to consider, in examining their codes of professional conduct, the differing roles that lawyers play in addressing business human rights issues: that is, as technical advisers, or as trusted advisers, or as leaders of the institutions in which they work’.
It is as ‘trusted advisers’ that business lawyers can help clients deal with the issues and risks associated with non-binding global standards such as the UNGPs, Sherman says: ‘If you are an outside counsel and are retained for a very restrictive matter, then it is hard to exercise that role.’
The forthcoming guide for business lawyers will seek to address these and other concerns raised by the profession, including lawyers’ potential liability in situations where clients decide to disregard advice on risk exposure to human rights, says Ellis. ‘From a lawyer’s perspective the best you are placed to do is to bring this to the attention of the client and then it is ultimately the client’s decision as to what they actually do.’
One option is withdrawing representation, but Chamberlain argues that in some cases ‘it is much better to keep on working with organisations and keep on discussing the issues, and hopefully bring [clients] to understand what can be done’.
Hughes-Jennett concurs: ‘There are instances where, actually, it is not in the interest of human rights to terminate the relationship because you, as a lawyer, have greater leverage than anyone else with that client.’
Such a decision will also depend on the seriousness of the violation. Brabant says he would not hesitate to withdraw, if, for example, a client was perceived as being ‘complicit’ – that is, benefiting from a human rights abuse committed by another party. The firm could be seen as complicit in the abuse, and risk being named and shamed in the court of public opinion.
‘If a client doesn’t take your advice in relation to a gross human rights abuse, my personal perspective is that I withdraw,’ NRF’s Brooks adds. ‘I have given uncompromising advice which has led people to go elsewhere.’
Another potential conflict is with a lawyer’s duty to act in the best interests of clients. ‘Superficially, you might conclude that the duty to respect human rights could conflict with the duty to act in the client’s best interests,’ Brooks says. ‘But I would work on the assumption that it is in the client’s interest to understand what the requirement to respect human rights is and to act accordingly.’ For Brooks, a lawyer has a duty to raise human rights issues, and ‘that falls within the compass of always giving the best and right advice to a client’.
Yet, as Lindsay points out: ‘I don’t think anybody in the profession could point-blank say there is never going to be irreconcilable conflict.’
The UNGPs require businesses to show that they respect human rights to avoid an adverse impact on reputation. But firms operate under ‘a penumbra of confidentiality’ in that they have limited reporting responsibilities and are bound by confidential client-lawyer communication, Sherman notes. ‘That’s where the tension is. There is [increasing] market pressure on firms to say that they are endeavouring to respect human rights and find methods of disclosing that in a way that doesn’t harm confidential business communication.’
In its guidance, the IBA recognises that reconciling lawyers’ ethical and professional standards with their responsibilities under the guiding principles may be a challenge: ‘The codes of a number of bar associations are already strongly aligned with the UNGPs, although it is possible that there will be tensions and dilemmas arising from their applications in practice.’ Therefore, the IBA recommends that individual bar associations consider ‘how to address potential dilemmas’.
‘Some people remain resistant and there are a lot of difficult questions to be answered,’ says one lawyer who prefers to remain anonymous.
This is clearly a complex issue, but in the corporate world at least the new global standard on
business and human rights is being adopted at a pace.
Ruggie is currently advising FIFA, world football’s governing body, on a new human rights policy implementing the UNGPs that will cover all areas of its activities across the world. ‘That is a good example of how the guiding principles are going to become very real, very quickly,’ Sherman says.
Law firms cannot afford to be laggards. As Brabant points out, lawyers failing to meet new expectations of them may not end up in court, but could face ‘new judges’ in civil society and the media, imposing ‘new sanctions’.
Marialuisa Taddia is a freelance journalist