Written evidence from the Business & Human Rights Resource Centre (HRB0019)

Thank you for the opportunity to provide evidence to the Joint Committee’s inquiry on business and human rights.

The issue of business and human rights is now recognised as critical to the sustainability and credibility of global markets, and the license of companies to operate, especially internationally. The UK Government has shown international leadership in a number of respects. Nevertheless, there remains enormous potential for further UK drive to deliver shared prosperity and security through inclusive markets that respect human rights.

In September 2013, the UK became the first country to release its National Action Plan (NAP) to implement the UN Guiding Principles on Business & Human Rights (UN Guiding Principles), demonstrating its commitment to address business and human rights issues at a strategic level. The UK was also the first to publish an update to its NAP in May 2016. This leadership is welcomed and the UK has shown some indications that it is willing to engage meaningfully on a policy and statutory level on business and human rights.  Good examples of this commitment include its introduction of the Modern Slavery Act, its admission as a candidate country to the Extractive Industries Transparency Initiative and its introduction of the Reports on Payments to Governments Regulations 2014 by which the UK became the first EU state to force extractive companies to report on the payments they make to governments in all countries in which they operate from the start of 2015.  Having been the first country to release its NAP, the UK has also made efforts to encourage other countries to follow its lead, including asking its embassies to engage host governments on the issue of publishing and implementing a NAP.

While these are undoubtedly positive moves by the UK Government, Business & Human Rights Resource Centre’s international network of regional researchers continues to receive serious reports of abuse by UK companies internationally. Since 2005, the Resource Centre has made over 300 approaches to UK headquartered and listed companies for responses to allegations of serious human rights abuses around the world; around 77% of these resulted in a response.  Our analysis of these approaches indicates that there are three main areas of concern. 

1. The vast majority of these cases related to allegations of extraterritorial abuse, mostly in the Global South where victims had limited access to remedy.
2. A disproportionate number of allegations are against extractive companies; 47% of our approaches were to these companies.
3. Labour abuses emerged as the largest area of concern for non-extractive companies with 32% of approaches made to companies concerning this issue.

Access to Remedy

While UK companies are well regulated in their operations within Europe many UK companies are implicated in serious abuses abroad, particularly in the Global South where the consequences for breaching human rights (if there are any) can be much less costly, and victims often have limited or no access to legal remedies.

In recent years, access to remedy in the UK has actually narrowed. One example is the Legal Aid, Sentencing and Punishment of Offenders Act 2012 which made two main changes to Conditional Fee Agreements that make accessing justice more difficult for victims:

• the success fee (still 100% except in cases of personal injury, capped at 25%) must now be paid from the compensation awarded to the victims of abuse;
• and the costs incurred by the winning sides’ legal team, which are recoverable from the losing side must now be “proportionate” to the amount awarded in compensation.

These changes have created barriers to justice for a number of reasons. Firstly, these cases are by their very nature extremely complicated. They often involve complex corporate structures and hundreds if not thousands of claimants. This means that legal costs can often be very high and can even exceed the compensation awarded. This is compounded by the Rome II Regulation, which provides that compensation awarded in UK courts must be at the levels awarded by the local courts. This makes it increasingly unlikely that the UK legal costs will be determined as proportionate when compared to compensation awarded at a local level.

Labour rights & modern slavery

The UK Modern Slavery Act 2015 is a landmark piece of legislation for big business around the world.  This legislation was welcomed by NGOs and investors. Particularly welcomed was the Government’s announcement that it would include provisions to compel large companies to state publicly the action they have taken to ensure their supply chains are slavery free. However, NGOs and many companies have also pointed out the limitations of the Act.

The majority of early company statements published to date do not yet comply with the Act’s basic requirements (see our analysis of the early statements here): companies must make a statement approved by the Board and signed by a company director (or equivalent) available on the homepage of the company’s website. Analysis by Ergon Associates uncovered a number of statements with very similar or identical wording; this indicates that companies are using the same advisor or template in order to superficially comply with the Act.  Without further government enforcement the potential of the Act to transform corporate behaviour with respect to modern slavery will not be fully realised. 

Enforcement provisions in the Act are weak and currently the Government is looking to civil society to create the pressure on business to take action on modern slavery.  However, as there is no government central repository or register which makes it clear which companies are required to produce a statement, it is very difficult for civil society to fulfil this role. This lack of transparency also undermines the creation of a level playing field and is unfair on those companies that are taking their obligations seriously under the Act.  The private members bill put forward by Baroness Young contains a number of provisions that would enhance the effectiveness of the Act.  In particular, it would require:

• commercial organisations and public bodies to include a statement on slavery & human trafficking in their annual report and accounts;
• the Secretary of State to publish a list of all commercial organisations that are required to publish a slavery & human trafficking statement; and
• contracting authorities to exclude operators who have failed to provide a slavery & human trafficking statement.

While we would prefer to see stronger enforcement action taken by the Government against companies that are not complying with their obligations under the Act, if civil society is expected to fulfil this role, changes such as those in the bill are essential if we are to have the tools to do so.

Increased risk of exploitation in the UK

The government should also be aware and implement a plan of action concerning the heightened risk of exploitation, including modern slavery, of migrants following the Brexit referendum.  The vote to leave the European Union means many migrants from EU countries, particularly those in low skilled or seasonal work, are especially vulnerable as their position and future rights have become more uncertain.  This uncertainty will be utilised by unscrupulous employers to exploit already vulnerable workers. 

Exploitation of refugees in Turkish garment supply chains

Following reports of serious labour abuses of refugees in Turkish garment factories including, discriminatory wages far below the minimum, sexual harassment and abuse, and child labour we decided to investigate what action brands were taking.  Turkey is a major exporter of textiles to Europe including the UK high street.  In February 2016, we released a briefing detailing and comparing the practice of 28 leading apparel brands, 13 of which were headquartered in the UK.  While this revealed that some UK companies were taking a targeted approach to this issue (including NEXT, Primark & Whitestuff), the vast majority were not carrying out the necessary due diligence to combat this abuse and were closing their eyes to the exploitation occurring in their own supply chains. 

With Syrian refugees continuing to flow into Turkey, following devastation in their home country, this situation will only become more serious.  Without concerted action by the whole apparel sector, clothes being sold on our highstreets will continue to be made with the exploitation of Syrian refugees.  

UK National Action Plan update

The UK became the first country to publish an update to its National Action Plan in May 2016.  It should be commended for a thorough week-long consultation process to gather input on the update with a dedicated cross-ministerial team from the FCO and BIS.

The updated plan includes several strong aspects including a reference considering human rights in public procurement and UK Export Finance decisions as well as an explicit commitment to work with embassies and high commissions to support human rights defenders. 

However, the plan is significantly lacking on specific commitments to improve access to remedy for victims of business-related human rights abuses. We recommend a stronger focus on access to remedy in the annual reviews (see specific recommendations below).  Furthermore, we recommend the UK takes the opportunity in its annual reviews to provide more clarity around timelines, concrete commitments and ministerial responsibilities. For further recommendations submitted to the UK NAP revision process, see here.  

Recommendations

The Government should look at ways to help companies embed respect for human rights throughout their international operations. However, in addition to increasing capacity at the company level, the Government should also look at ways of increasing extraterritorial accountability for breaches of human rights by its companies. Knowing that they will be held accountable will force companies to address these issues and drive change. There are several immediate opportunities to make progress in a number of key areas, at domestic and international level. In particular, the Resource Centre recommends the Government takes the following steps:

Mandatory transparency & accountability:

• work with European partner-governments to ensure early and bold transposing of the Non-Financial Reporting Directive into national law to provide the highest levels of accountability regarding human rights due diligence
• translate political understanding on EU conflict minerals into rigorous regulations including ensuring downstream companies also implement due diligence in line with OECD Guidance
• strengthen the supply chain reporting requirements of the Modern Slavery Act by including clearer requirements for disclosure and stronger enforcement provisions
• make human rights obligations central to Bilateral Investment Treaties by: (1) ensuring investor protections are dependent on compliance with international human rights standards, and (2) companies are not able to take host governments to international arbitration over measures that seek to improve the human rights of their citizens
• peer-learning across UK & other embassies in intervening in cases to support human rights defenders

Access to justice:

• utilise the existing legislation (Criminal Law Act 1977) to hold companies accountable for abuses, including those committed abroad. In this respect, more awareness-raising with prosecutors and judges would be helpful.  Explore using the Bribery Act as a model to further extend extraterritorial criminal liability for human rights abuses.
• improve access to civil remedies for victims of extraterritorial corporate abuse, including introducing an amendment to the LASPOA to ensure that it is financially feasible for law firms to take on such cases and victims receive fair compensation
• implement recommendations from Amnesty International’s review of the UK National Contact Point for the OECD Guidelines, including engaging in a peer review (see details here)
• strengthen the access to remedy element of the UK’s National Action Plan on business & human rights, particularly setting out how it will ensure overseas victims, including those in the supply chains of UK companies, are able to access justice in the UK

Incentives:

• build on commitment in NAP for UK Export Finance (UKEF) to consider final statements by the UK OECD National Contact Point by committing to only support projects through UKEF that have undertaken strong human rights due diligence and are not associated with serious rights abuses
• build on commitment in NAP to allow for human rights-related matters to be reflected in the procurement of public goods by committing to only provide access to public procurement contracts to companies that have undertaken strong human rights due diligence and are not associated with serious rights abuses
• support market based mechanisms that incentivise companies to perform better on human rights, such as the Corporate Human Rights Benchmark

Extractives:

• develop a specific action plan to improve the human rights performance of extractive companies abroad and particularly in Africa

Labour Rights and Living Wage:

• promote freedom of association and right to collective bargaining in international fora, governments, and UK companies
• develop a specific action plan to combat exploitation of EU migrants in the UK in the wake of the EU referendum
• implement legislation requiring the garment sector to carry out mandatory human rights due diligence in their supply chains

July 2016