Navigating the IBA practical guide on business and human rights

On 28 May 2016, the International Bar Association (IBA) endorsed the IBA Practical Guide on Business and Human Rights for Business Lawyers (Practical Guide).

Stéphane Brabant, Co-Chair of Herbert Smith Freehills Business and Human Rights responds to some key questions about the guide and its intended audience. He is a member of the IBA Business and Human Rights Working Group (chaired by John Sherman) that developed the Practical Guide.

Click here to view a quick checklist of what in-house and external lawyers need to do.

What is the Practical Guide? Who is it for?

The Practical Guide is designed to help lawyers better understand the emerging field of ‘business and human rights’ and why it matters to law firms and lawyers advising businesses. The Practical Guide explains the implications of the United Nations Guiding Principles on Business and Human Rights (UNGPs) for lawyers and explores the way in which lawyers and law firms could integrate human rights advice into their activities.

The Practical Guide is aimed at internal and external lawyers advising businesses and at law firms that, as businesses, also have a responsibility to respect human rights. In-house lawyers report being increasingly consulted by their management on human rights issues and risks and external lawyers are also being asked by clients to advise on human rights related risks and how to anticipate and manage such risks.

Who prepared the Practical Guide?

The IBA was created in 1947 to promote the rule of law across the world. The IBA is particularly well positioned to work in cooperation with national and regional bar associations and law societies on business and human rights, a truly global topic. The Practical Guide was prepared by the IBA Legal Policy & Research Unit (LPRU) and the IBA Business and Human Rights Working Group in close collaboration with bar associations, individual lawyers, civil society organisations, academics and corporations.

The Practical Guide complements the IBA Business and Human Rights Guidance for Bar Associations, endorsed by the IBA Council in 2015 and which provides guidelines for bar associations to develop training and education on business and human rights.

Although the IBA does not have the intention to override the professional standards of any jurisdiction nor the regulations of bar associations and law societies, the Practical Guide could guide their efforts to encourage lawyers to integrate human rights when advising business clients.

Why should business lawyers be concerned with human rights?

Human rights have long been viewed as of little relevance to the world of business. However, the past fifteen years have increasingly brought business and human rights together and the UNGPs, which were adopted in 2011, reflect a global consensus that all businesses, large and small, should respect human rights.

Often viewed as soft law, the UNGPs have inspired public policy, laws and regulations around the world, including the Modern Slavery Act in the UK, National Action Plans on Business and Human Rights in several countries, including Columbia and non-financial reporting requirements adopted by the European Union and by major stock exchanges in Asia. Furthermore, as the Practical Guide puts it "what is considered unethical and a reputation risk today may well be unlawful tomorrow". The UNGPs have also influenced the drafting of commercial agreements and the policies and processes of companies worldwide.

With an increasing number of laws and standards requiring businesses to respect human rights, businesses must make sure that their activities and those of their suppliers do not (and will not) adversely affect human rights. Failing to respect human rights exposes companies to serious commercial and legal risks, including reputational damage, civil and criminal liability and the risk of serious disruption to operations or investment plans (withdrawal of financing for a project, boycotts or industrial action) resulting in "hard sanctions" for businesses.

Lawyers advising businesses have a deep understanding of how businesses operate, of the legal framework applicable to businesses' activities, and of the means to ensure compliance with such a framework; they have a key role in helping clients to anticipate, assess, and respond to risks of negative human rights impacts arising from business operations or activities.

How relevant is the Practical Guide to the different legal practices?

Business activities can impact human rights in numerous ways, which in turn affect a number of legal practices. Take a hydropower project. The construction and then operation of a project may affect the livelihood of local populations and there are numerous examples where such projects have faced serious allegations of human rights abuses. International standards such as the IFC Performance Standards and the Equator Principles mean that loans for such projects now include strict human rights requirements and any lawyer working in project finance needs to be able to advise clients in this area.

Elsewhere, a company may discover that a supplier is using child and/or forced labour. The working conditions in a factory may affect worker's health and safety. A technology company may be accused of violating individuals' right to private life because a leak led to the release of thousands of clients' credit card details and personal information. A company may be accused of infringing the rights of workers to unionise. Human rights impacts can be everywhere: across continents, industries, supply chains, and practice areas.

As the Practical Guide explains, lawyers have an important role to play in that context, advising on human rights across the full range of practice areas including corporate, disputes, IP/IT, energy and infrastructure, real estate, tax, banking and finance.

How should lawyers use the Practical Guide and what is the impact of the Practical Guide on clients?

First, reading the Practical Guide will provide lawyers with an introduction to the UNGPs and the relevance of human rights to businesses. It also gives examples the risks faced by businesses which fail to respect human rights. The Practical Guide then details the relevance of human rights to a number of legal practice areas.

Overall, the Practical Guide aims to raise lawyer's awareness of the UNGPs and of the growing range of laws and standards in to the area of business and human rights. It then encourages lawyers to consider the risks their clients face should they fail to respect human rights, and how they could best advise them to anticipate and respond to those risks. In turn companies that best comply with human rights stand to gain competitive advantages.

The Practical Guide is meant to help lawyers anticipate and mitigate legal, operational, financial and other collateral risks that arise from clients' adverse impacts on human rights. Lawyers could consider integrating human rights clauses or requirements in contracts, they could build new arguments in the event of a dispute, they could assist clients in drafting human rights policies, they could integrate a human rights section in their due diligence report for acquisitions, they could consider the impact on local communities of land acquisition, and of real estate projects in general, and so forth.

What should lawyers do when discovering evidence of a client violating human rights?

The Practical Guide will help lawyers to assess the level of involvement of their clients and to respond accordingly. The UNGPs differentiate between 1) a business action that leads directly to an impact (which means the business causes the impact); 2) a business action that incentivises, facilitates or enables third parties impact (which means the business contributes to the impact); 3) a business operation, product of service that is directly linked to an impact even without causing or contributing to such an impact (this means the business is linked to the impact).

Depending on whether a client is causing, contributing, or linked to the adverse human rights impacts, the Practical Guide will guide lawyers through the response expected from them and from their clients. This includes ceasing the action causing harm, remediating the harm, using leverage to seek to mitigate the risk of future harm, etc.

The role of lawyers, is to identify the situation of possible adverse impact, then communicate to the client the risks resulting from this impact. The Practical Guide also explains how essential it is for law firms to have an ability to influence a client to avoid or mitigate human rights impacts of its activities.

Lawyers can help clients work out the appropriate solution to the impact. For instance, if your project is causing water pollution affecting neighbouring communities you will need to remediate the harms. To that end, lawyers will work with their clients to take a number of actions and commitments, from compensation mechanisms to setting up relocation plans of the community. In case a client's liability is engaged in front of national jurisdictions, or national contact points, it is important that your defence account for human rights and that you engage, as far as possible, in dialogue with the various parties involved.

Lastly, lawyers could advise their clients on how to anticipate and prevent any potential other impacts from appearing. Lawyers are particularly qualified to assist clients with drafting human rights policies for their client's operations and relations with suppliers. Prevention could also include integrating human rights clauses in commercial agreements, engaging into multi-stakeholders initiatives and conducting due diligences along supply chains.