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Tuesday, January 19, 2010

The Wheel Already Exists, Use It! A Response to the Work of John G. Ruggie on Non-Judicial Grievance Mechanisms for Business and Human Rights

This essay is from September 2008 and provides some of my early thoughts on the concept of "non-judicial grievance mechanisms" that could serve to adjudicate disputes regarding the human rights practices of business.  It was submitted as part of an open forum for John G. Ruggie, Special Representative to the United Nations Secretary General on Business and Human Rights.

The very concept of "non-judicial grievance mechanisms" is illustrative of a huge step towards rethinking the problems associated with the "governance gap" with respect to human rights enforcement, and incorporating international human rights norms into business practices.  By "non-judicial" we likely mean to distinguish such a mechanism from state judicial institutions, rather than non-legal institutions per se.  Legal (or "judicial") reasoning would, presumably, still be applied in "non-judicial" grievance procedures.  By this we mean that factual behaviours will be assessed with reference to accepted normative frameworks of reasonableness, such as laws or international norms.  Those behaviours that are justifiable in relation to accepted reasonableness frameworks will be assessed as acceptable, those found to be non-compliant with accepted reasonableness frameworks will be assessed as unacceptable.  This process is the same used in state based "judicial" systems, and will inevitably be the basis of non-state "non-judicial" mechanisms as we so define it.

The paradigm shift then is not in the approach or methodology that will be applied in the mechanisms that we are attempting to create, but the fact that the mechanisms will not be necessarily associated with or tied to state systems of legislation and law enforcement.

There is a powerful practical reason why we are attempting to de-link the concept of "grievance mechanisms" from state judicial institutions.  For one, states have been slow to act in creating grievance mechanisms to address business and human rights issues (hereinafter referred to as "BHR") that arise internationally, and outside of a particular jurisdiction.  Moreover, BHR issues often arise within jurisdictions where governance in the area of BHR is frail, or non-existent.  Such circumstances were the very impetus for the creation of international BHR standards.  Surely it would be imprudent to premise their effectiveness on a change in state behaviour towards enforceability of BHR standards.

Secondly, and perhaps inter-relatedly, international BHR standards have been developed, and promulgated, at the supranational level.  These standards have also, quite remarkably, been at least tacitly recognized as valid and legitimate by a significant number of multinational businesses, the very actors whose behaviour will be scrutinized in relation to such standards.  The reason for this has been attributed to the importance of "reputational risk" for business in the area of BHR.  Failure to meet internationally accepted standards of BHR practice has been found to imperil the capacity of business to continue operating in their markets.  The costs of bad publicity or violating the trust of stakeholders have proven enormous for many businesses that failed to adequately address such issues in their business practices.

Similar conclusions have been reached by markets and investors, which have begun to view compliance with international BHR standards as a non-financial indicator of sound management and long-term corporate performance.  This trend has resulted in the quantification of the "value" that is created by what is in essence "legal" compliance with international BHR norms.  These market pressures have further forced more businesses to (at least tacitly) accept international BHR standards as the "benchmark" against which their performance in these areas should be assessed.  To demonstrate compliance, many businesses have joined international frameworks like the Global Compact, and even voluntarily chosen to disclose information on BHR practices in non-financial reporting of the sort promoted by the Global Reporting Initiative.

The challenge that we now face is how to move beyond mere acceptance of international BHR norms as benchmarks, and towards creating ways of "enforcing" compliance, or otherwise remedying circumstances of non-compliance.

Many alternatives have been considered, but have been seen to come up short.  Voluntary compliance has occurred in a number of cases, but ultimately is premised on a cost benefit analysis that may result in significant violations where no consequences are expected to result from non-compliance.  Similarly, and despite the effect the market has had on the acceptance of BHR norms as benchmarks, the market will often only penalize companies for failure to meet such benchmarks where the loss in "value" associated with such a failure is not outweighed by the potential for gain.  There are countless scenarios that can be envisioned where violations of international BHR standards could be offset by gains, so as to make for a worthwhile investment from a returns perspective.  Therein lies the weakness of a purely market driven approach.

The participation of state actors in governing compliance would make things much easier.  States are really the only entities in society with the capacity to truly enforce compliance with legal norms and remedy non-compliance most of the time.  Unfortunately however, we have already recognized that waiting for States to act is not adequate.  There are too many problems of extra-territoriality, and/or willingness to take action, to focus our attention on how to get States to pay attention to BHR issues, create legislation, and begin to use domestic state judicial mechanisms to enforce compliance or remedy non-compliance with BHR standards.

Despite our identification of the inevitability of moving beyond state judicial mechanisms, several of the proposals so far contemplated in this consultation nevertheless require some sort of State action to be plausible.  International capacity building programs would be used to encourage and cajole State action.  "National Ombudsmen" (or Ombudswomen) would, presumably, require some kind of State sanction and support to be at all effective.  "OECD National Contact Points", and "Trade Agreement Mechanisms" too would require State participation, since the members of both the OECD and Trade Agreements are in fact States.

The other proposals also focus on encouraging others to develop a willingness to act, whether or not such entities have any self-interest in doing so, or whether they have ever done so in the past.  For example, establishing an "Industry Ombudsman" would presumably necessitate that industries (and the business entities that compose them) willingly establish and empower such an Ombudsman, whose mandate may well come into direct conflict with their own commercial objectives.  There is no reason to believe that this would be the case, and even if it were possible, it would take substantial effort to convince such entities that it would be in their interest to do so.  As well, there would remain the question of oversight, namely whose interests does the Ombudsman represent, and who is he accountable to?

The proposal to use "Company Grievance Procedures" suffers from the same problems, except more so.  Company grievance procedures derive from negotiated agreements and are intended to enforce the terms of a contract.  As has already been identified, third parties have no standing to bring grievances under such procedures.  We can dream that one day they might, but they don't now.  For this plan to be plausible it would necessitate a completely new mindset, and potentially enactment of new laws by States.  Back to "square one".

International Framework Agreements and Multi-Stakeholder Initiatives are interesting sources of non-judicial grievance mechanisms.  In fact, the international BHR standards that will be the basis of normative reasonableness in any such mechanism have, for the most part, been created in such fora.  The problem with these proposed approaches is that it is difficult to get agreement (in the form of a treaty or other international instrument) on something like the creation of an international grievance mechanism.  For example, while parties to the Global Compact may have been willing to agree to the principles of the Compact, it would be an entirely different thing for them to agree to be bound by an independent and open grievance mechanism that would accept complaints, adjudicate claims of malfeasance, and monitor corporate compliance.  While not an inconceivable proposition, and not a huge leap from the apparent monitoring aspects of the Global Compact, we probably aren't there yet.

So, it seems that we are left rethinking what it is that we actually wish to accomplish with a "non-judicial grievance mechanism".  Most fundamentally, the objective of such a mechanism is to do what state sanctioned or company sanctioned judicial mechanisms or grievance procedures do, namely enforce compliance and remedy non-compliance with the normative frameworks to which parties are bound.  In the case of BHR, this would mean enforcing compliance and remedying non-compliance with accepted international BHR standards.

Two questions arise, (1) how are businesses "bound" by international BHR standards, and (2) how can enforcement and remedial action take place in the absence of consent or state enforcement?

To the first question, I would argue that businesses are bound by the fact of their agreement, or the fact of a generally held consensus on international BHR standards.  To illustrate this, it is useful to consider an historical analogy, arising from the Helsinki Accords, created in 1975.  The Helsinki Accords were, generally speaking, a political attempt to improve the relations between the Communist bloc led by the then Soviet Union, and the West.  The Accords' "Declaration on Principles Guiding Relations between Participating States" (also known as "The Decalogue"), included a seemingly innocuous provision stating that the parties to the Accords would have, "Respect for human rights and fundamental freedoms, including the freedom of thought, conscience, religion or belief."  To encourage compliance with these principles by States, compliance monitors such as Human Rights Watch were established.  While these compliance monitors could not "enforce compliance", or "remedy non-compliance", they could identify non-compliance and hypocrisy, and in this way do serious harm to the public image and moral sanctity of those who would defy the principles of the Decalogue.  Many historians believe that acceptance of these principles by the Soviet Union, and the work of compliance monitors, ultimately empowered dissident movements which could argue that concepts like freedom of speech had been officially endorsed, and were being breached by repression.  By agreeing to the Decalogue principles, and creating a situation where State conduct was evaluated in relation to such principles, the focus shifted from the legitimacy of the principles themselves, to the question of State compliance, and avoidance of hypocrisy or stinging criticisms.  In this way, the normative framework was "binding", if only on the "conscience" or "intellect" of those that it applied to.

Similar normative frameworks have already been widely promulgated in the area of BHR, and generally accepted by the actors whose behaviour such frameworks are intended to affect.  In this way, they are binding because failure to comply entails risks of adverse consequence, namely the appearance of a failure to live up to commitments or expectations.  Companies are far more susceptible to the fall out of such appearances than sovereign States, since companies are extremely sensitive to public opinion, and the opinions of markets and stakeholders, who they rely on for their existence.

So, is the solution to create a "Human Rights Watch" for business?  Yes and no.  Compliance monitoring already takes place, by Human Rights Watch itself, and by entities such as the Business & Human Rights Resource Centre, which is a site that the Special Representative of the UN Secretary-General on business & human rights, John G. Ruggie (the "SRSG") is associated with.  The problem with this sort of compliance monitoring, for our purposes, is that it is too journalistic, too based on hearsay, and not sufficiently based in legal analysis, to be considered a credible grievance mechanism.

Despite the limitations of the compliance monitoring that has taken place to date, there is no reason why the strengths of such instruments, namely the ease with which they can be initiated and scaled up, and their potential for moral suasion, cannot be incorporated into the grievance mechanisms we are contemplating. Moreover, the weaknesses of compliance monitoring could be corrected by establishing a back-end complaint verification system and judicial assessment procedure for alleged violations of BHR standards.  Similar to the Business & Human Rights Resource Centre, businesses accused of such violations could be invited to respond to allegations.  Unlike the Business & Human Rights Resource Centre however, the new mechanism should engage in fact checking and a sound legal analysis of the complaint, based on real and broadly accepted standards, to determine whether it has any merit.  This will necessitate the establishment of an impartial judicial panel, or series of panels.  Panel members should be legally trained and unbiased to the extent possible, or equally representative of varied interests (i.e. business and human rights NGOs).  They could not be seen to be tainted by political motives or interests.  They would have to be trained and skilled in legal analysis, and open minded to persuasive arguments by all sides.  The process could be inquisitorial, so as to alleviate the necessity of advocates, although the use of advocates (via written submissions or otherwise) should be permissible.

Procedurally, a panel would hear evidence and argument.  Once the evaluation and assessment of the facts and law is conducted, reports should be issued that come to some sort of a conclusion, in the form of a declaration, on the degree to which a company is compliant, or non-compliant, with the applicable normative frameworks.  Reasons should be given in a way that forwards our understanding of BHR standards, and further codifies what is considered an acceptable business practice and what is not an acceptable practice.

The analysis would not be "ethical", or "moral", in nature.  Instead, it would be legal and based on actual social sources of BHR principles.  It would be based on the ("hard" or "soft") law as it is, not as interest groups or others "wished" it would be.  This would be the only way to make the findings of such an entity credible enough to be viewed as legitimate.

In answer to the second question posed above, we would have to rethink what it means to "remedy" alleged violations of BHR standards and "enforce" compliance in the absence of consensus or state backed sanctions.  While there would not be any real powers of "enforcement" or "remedy" that the proposed  grievance mechanism could invoke directly, such powers would not be necessary for effectiveness.  Publication of findings, and effective use of the media, could well be sufficient to promote compliance and to denounce those entities that are attempting to flout international norms.  We have already noted that markets and market actors often take these matters seriously, and that businesses themselves are concerned with their reputations.  Such findings would be highly useful for investors deciding on the degree of non-financial BHR risks associated with a company's practices, for consumers to decide who they should do business with, and for developing nations choosing which companies to do business with. There is also an intrinsic value associated with the "hearing" of such complaints, which should be viewed as remedial in itself.  Under such an approach, grievances can be aired and those accused of wrongdoing will have an opportunity to clear their name, making the process transparent and mutually beneficial for those with nothing to hide.

This sort of grievance mechanism would be easily scalable, because there would be no need for anyone to "sign on" to such an initiative.  The normative frameworks have already been agreed to, and are seen to be "generally accepted".  This means that the initiative could be done right now, without the time and costs of consensus building associated with other proposals.  The entity could be overseen by a board of respected persons in association with the United Nations.  The recently appointed Global Leadership Group and the SRSG himself would seem ideally suited for the role.

Those companies that have not signed on to frameworks such as the Global Compact should (and must) not be spared from scrutiny.  Generally accepted BHR principles are just that, "generally accepted", and that is enough to hold them out as norms that businesses are expected to comply with.  Moral or cultural relativism may be raised as an argument, but if it is, it should be done so explicitly, and it will be for the public, and the market, to determine whether such arguments are persuasive or acceptable.  Such arguments will not, however, be a reasonable justification for violating generally accepted norms for the purposes of the grievance mechanism which must be premised on the universality of such norms, if universality is a generally accepted aspect of the norms themselves.

The foregoing proposal would not require action on the part of anyone except those who are aleady interested in seeing a grievance mechanism of some sort come about from the international frameworks that currently exist.  It would be a relatively straightforward process to implement, and could be scaled up quickly.  In light of the market and reputational interests that are clearly at stake, it could also be highly effective in encouraging compliance, and also generating a body of legal analysis that will further define the parameters of BHR concepts, and thereby further enhance its legitimacy as a benchmark for performance.  Furthermore, the findings of such a mechanism would also be useful for markets and investors (including institutional investors and pension funds) to better understand the extent to which businesses are compliant or non-compliant with BHR standards for the purposes of valuation.

Most importantly, such a mechanism would provide a forum for allegations of non-compliance with BHR standards to be heard, and also challenged, by interested parties.   In short, it will help those of us in the field to use what we already have more effectively, to move beyond agreement, and towards action.

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