The Kiobel case at the US Supreme Court has put the issue of corporate liability for human rights abuses firmly in the spotlight. IBA Global Insight assesses whether businesses and law firms are doing enough to meet their obligations.

In the 1990s, it is alleged, Anglo-Dutch oil giant Shell was complicit in gross human rights abuses committed by the Nigerian military dictatorship, including torture, rape and extrajudicial killing, which Shell denies. The class action was brought over a decade ago by a group of Nigerians under the 1789 Alien Tort Statute (ATS), which allows foreign nationals to bring civil suits in United States federal courts for violations of customary international law.

Kiobel v Royal Dutch Petroleum (Shell) is the last in a long line of ATS suits against corporations. The first was in 1996, when a group of Burmese citizens alleged that California-based Unocal was complicit in serious human rights violations while installing a gas pipeline through their village. The parties eventually reached a confidential settlement in 2005, with Unocal providing funds for programmes in Burma to improve living conditions and protect the rights of people from the pipeline region. Dozens of other cases have since have been dismissed. Indeed, despite over 120 claims against corporations – from labour trafficking in the Middle East to aiding and abetting apartheid in South Africa – there is yet to be a jury verdict against a multinational corporation in an ATS case.

Now, with the US Supreme Court due to rule on Kiobel imminently, there are fears that corporations may never get their day in court. In their attempts to have the case dismissed, Shell’s lawyers have claimed the entire premise of the ATS is flawed; it does not apply to companies, they say, because international law ‘refutes corporate responsibility’ on these issues. To compound the ATS’s woes, the Supreme Court justices are also examining a further question: whether the statute should be used at all for human rights violations occurring outside the US. In the 224 years since its creation, the ATS has never been so beleaguered.

For John Ruggie, the former UN Secretary-General’s Special Representative for Business and Human Rights, the case has taken an unfortunate turn. Having spent six years drawing up the UN Guiding Principles on Business and Human Rights, which establish a non-legally binding global standard for corporate human rights obligations [see box], Ruggie voices concern over how the Principles are being applied here. Is an attempt to undermine an entire statute dedicated to the remedy of egregious wrongdoing, he asks, really in line with the corporate ‘responsibility to respect’ human rights?

‘Should the corporate responsibility to respect human rights remain entirely divorced from litigation strategy and tactics, particularly where the company has choices about the grounds on which to defend itself?’ he writes in a September 2012 Harvard Kennedy School brief. ‘Should the litigation strategy aim to destroy an entire juridical edifice for redressing gross violations of human rights, particularly where other legal grounds exist to protect the company’s interests?’

Yet Ruggie reserves much of his concern for the role of the lawyers, who lie at the fulcrum of the decision-making. ‘Would [their responsibilities] encompass laying out for their client the entire range of risks entailed by the litigation strategy and tactics?’ he asks. ‘Including concern for their client’s commitments, reputation and the collateral damage to a wide range of third parties?’

Soft law, hard consequences

Ruggie admits he doesn’t have the answers here. But the implication is clear: good lawyers need to start taking heed of his Principles. Law firms are going to have no choice but to do this as the Principles are now internationally recognised,’ says Yasmin Batliwala, Chief Executive of Advocates for International Development (A4ID), referring to the endorsement of the Principles by the UN Human Rights Council in 2011. ‘All businesses are likely to be increasingly judged on their record as the Principles become an established part of the global human rights framework.’

A handful of top corporate law firms are already leading the way here. It may not yet be integrated into normal practice, but Clifford Chance, Freshfields, Linklaters, Allen & Overy and others have taken steps to incorporate the Principles into their advice. Clifford Chance partner Rae Lindsay, who specialises in international law and litigation, says clients are taking Ruggie ‘very seriously’, and expecting their lawyers to do the same. ‘There has certainly been a shift in thinking since the Principles were unanimously endorsed,’ she tells IBA Global Insight. ‘It is therefore incumbent on law firms to be able to understand them and integrate them into the advice they give.’

Though the Principles are not legally binding, Lindsay points out that they could have legal consequences. It won’t be long before corporations begin to work them into contracts, while regulations are already being formed around them. They have been absorbed into the OECD ‘Guidelines for Multinational Enterprises’, the International Organization for Standardization (ISO) guidance on social responsibility for companies and the sustainability policy of the International Finance Corporation. The European Commission is also developing guidance on corporate compliance with the Principles, including mandatory reporting obligations.

Eventually, explains John Sherman, an adviser to Ruggie and former chair of the IBA’s Corporate Social Responsibility (IBA CSR) Committee, a judge is going to examine whether a company has lived up to universally accepted standards of conduct in order to determine whether it has a duty of care, and will use the Principles as the legal yardstick. ‘It is said that ethics are a leading indicator of the law, and what is unethical today is illegal tomorrow,’ he says. ‘I think that kind of trend you can apply to the Guiding Principles.’

For the majority of lawyers, it seems, ‘that kind of trend’ remains firmly in their blindspot. But former Clifford Chance partner Tim Soutar, Chair of the IBA Pro Bono Committee, believes a cultural shift may be on the horizon. ‘I think there are still an awful lot of City [of London] lawyers that if you mentioned Ruggie, would not have a clue what you were talking about. But I think it is one of the things hovering on the horizon that could blow in quickly.’

Indeed, interest around Ruggie is evidently growing. The UN Forum on Business and Human Rights in Geneva in December 2012 attracted over 1,000 people – around ten times the number that had attended previous sessions on the subject – including dozens of lawyers. Sherman believes momentum will continue to increase as the human rights movement develops, just as environmental law grew out of the green movement. ‘I don’t know if law firms will ever have dedicated human rights practices, but you can see the trend,’ he says. ‘Those involved in licensing, in litigation, in governance are all going to run across human rights issues in some way.’

A look in the mirror

Lawyers may be starting to engage with the Guiding Principles in terms of their clients’ responsibilities – but what about their own? As businesses, law firms have an obligation to ‘Ruggie-proof’ their own operations too. Yet not one firm in the world is currently believed to have its own human rights policy. Even Foley Hoag, where Ruggie acts as senior advisor, comes up empty-handed. Indeed, only a small coterie of firms – including Freshfields and Clifford Chance – have signed up to the UN Global Compact, which lists a series of human rights commitments for businesses, and which many see as a stepping-stone towards the Principles.

‘Law firms are notoriously conservative and slow in terms of adapting to change,’ says Sif Thorgeirsson, Corporate Legal Accountability Project Manager at the Business & Human Rights Resource Centre. ‘They are so focused on what they do for their clients that there is very little focus on their duties as business entities.’

Lindsay concedes that law firms need to do more. ‘The larger corporations have been quite advanced on this and law firms have possibly lagged a little behind. I think they just don’t recognise they are part and parcel of the equation.’

Yet times may be changing. Clifford Chance, Linklaters and Freshfields are all currently putting together their own internal human rights policies, IBA Global Insight has learnt – though none have as yet been brave enough to put their head above the parapet. Traditionally outside the corporate comfort zone, human rights remains a sensitive topic, and getting partner buy-in has proved no easy task.

The problem for many stems from the perceived difficulty of reconciling their responsibilities to their clients with their Ruggie obligations. Under the Principles, if a business finds it has contributed to a human rights violation, ‘it should take the necessary steps to cease or prevent its contribution and use its leverage to mitigate any remaining impact’. Where the business has not directly contributed to a violation, but is simply associated with it via a business relationship, the Principles declare that various factors should be taken into account in determining what action to take: the business’s leverage over the entity concerned, how crucial the relationship is, the severity of the abuse and whether terminating the relationship would have adverse human rights consequences.

Where law firms are concerned, there are many questions to answer here. How much due diligence should a firm do before taking on a client? Should this cover a client’s full operations or simply those within the firm’s mandate? How can a firm prove its human rights credentials while maintaining client confidentiality? What happens if the client – as is often the case – is not forthcoming with information? What happens if it refuses to heed the firm’s advice? Who pays for all this additional work anyway?

‘It is an interesting ethical dilemma for lawyers,’ says Sherman. ‘A lawyer has the responsibility to represent a client to the best of their ability. If you decide you want to terminate the relationship, you have to weigh the issues of prejudice to the client. The Principles don’t trump legal ethical rules, but there are ways they can work together.’

But lawyers are not hired to be moral arbiters, many contend; their job is to find the best way to use the law to help their client. It is a widely held view. Yet most countries’ codes of conduct for lawyers encourage moral considerations to inform legal advice. Codes in Europe, Japan, the US and elsewhere state that lawyers’ obligations to their client should be balanced with their duty to the public good. In the US, the ABA allows a lawyer to terminate a contract if the client ‘insists upon taking action the lawyer considers repugnant’, while the Solicitors Regulation Authority for England and Wales says a lawyer can cease to act if they have ‘good reason’. Indeed, the ‘IBA International Principles on Conduct for the Legal Profession’ are grounded in the Universal Declaration of Human Rights: the touchstone for the Guiding Principles.

Lawyers therefore ought not cry ‘limited mandate’ as an excuse to ignore broader human rights concerns, stresses Lindsay. ‘I think some lawyers use this as a cop-out. I believe it is incumbent on lawyers to highlight risks beyond their mandate, and if clients disregard the advice, they can then decide how to react.’

While law firms have proved they are not averse to addressing these issues – several large firms played a seminal role in advising Ruggie – it is clear that the issue of human rights is generally still seen as something distinct from normal policy, to be respected or ignored on a whim. Business and human rights is yet to form part of the standard law school curriculum, and ‘human rights’ for many remains an alienating term. This, says Lindsay, must change. ‘People in corporate firms may think, why are human rights relevant? But making it workable and effective is about crossing those boundaries. It should be a common issue across all legal practice.’

Beating the bluewash

Others, however, are not so confident. Former IBA President Francis Neate, senior partner of Slaughter and May’s litigation department from 1986 to 1997, firmly believes that ethics have a role to play in the legal profession, but is highly doubtful the Principles will ever be truly accepted into the fold. ‘Personal moral obligations are unclear; professional obligations are clear,’ he says. ‘The truth is, everyone wants to act for Shell. You’ll just lose the client to someone else. With globalisation, it’s a hugely competitive business.’

Neate points out that the success of Ruggie relies on there being strong reputational concerns at stake. This involves public grassroots pressure and a visible brand against which people can rally. Law firms, which tend to work in the shadowlands of client confidentiality and whose names are unknown to the average person, are unlikely to feel such pressure.

Indeed, Patricia Feeney, Executive Director of Rights & Accountability in Development (RAID), a campaigning organisation fighting unethical practices in business, highlights the difficulty of finding lawyers to represent clients on a pro bono basis when the defendant is a multinational corporation. ‘They are afraid,’ she says. ‘If you’re dealing with large extractive industry companies, it’s almost impossible to access those services. The bigger firms with the capacity feel it would damage their interests, as they would be seen as anti-business, and small litigators can only go so far.’

And there’s the rub. Firms, and the companies they advise, may talk the talk, but how many will actually meet their commitments? Greenwash is already a commonplace term for companies claiming environmental credentials they haven’t earned; now bluewash – signing up to UN agreements such as the Global Compact without actually honouring them – may become the new green. With few effective oversight mechanisms for the Compact and Guiding Principles, such ethical laundering may not prove too hard.

One way of holding law firms to account, it has been suggested, would be to publish their clients in a transparent database, allowing public scrutiny and accountability. Such information is usually available with a little digging; this would simply make it more accessible. For most lawyers, however, this remains a step too far. Clients would almost certainly object, they say, and potentially move their business elsewhere.

Yet lawyers’ ability to shun the spotlight may be on the wane. In the United Kingdom, an impassioned public is now waving its collective pitchfork at the ‘big four’ international accountancy firms over tax avoidance; it may only be a matter of time before their attention turns to the legal counsel in the engine room next-door. Indeed, law firms, though shielded, are not immune from the public gaze. Unethical cases, such as those involving vulture funds – which buy debt from poor countries and then sue them for the full amount – and the recent News International phone hacking scandal, have resulted in severe reputational damage for the lawyers involved. Vulture funds are now outlawed in the UK, whereas the phone hacking scandal triggered nationwide reform of press standards. Both are classic examples of John Sherman’s point: ‘what is unethical today is illegal tomorrow.’

Whatever their stance on the Ruggie issue, it is clear that law firms’ input is central to the human rights debate. With the 100 largest firms taking a total revenue of $74bn in 2010 – a small fraction of the value of the global transactions they helped to shape – their influence cannot be understated. Though the line to be navigated between service provider and public custodian is rarely a straightforward one, getting the balance right is perhaps now more critical than ever.

The hope, says Batliwala, is that ethics and the law can ultimately be viewed as allies, not adversaries. ‘Lawyers start to do law because they believe passionately in making a difference. But somewhere along the line, because they are working so hard, they can forget that law is transformational and can do great things. The sooner more lawyers remember that, the more we can achieve.’