Opinion: Rio Tinto and the Juukan Gorge incident: legal compliance – always necessary, rarely sufficient

Edie Hofmeister
Co-Chair, IBA Business and Human Rights Committee
Ediehof1@gmail.com

Amandeep Sandhu
Sandhu ESG Law, Vancouver
amandeep@sandhuesglaw.com

*please note that Lara Douvartzidis of the International Bar Association, based in London, contributed sections to this article and the authors are grateful for her work. 

In the last decade multinational companies have practically raced to embrace aspirational standards beyond traditional black letter law in order to enhance their environmental, social and governance (ESG) performance. In large part due to the climate crisis, internal and external corporate stakeholders of multinational corporations – governments, shareholders, communities and activists – are driving this change, insisting companies go far beyond legal compliance. These efforts add another, often misapprehended, layer to internal corporate compliance, calling on companies to navigate a grey area that seemingly falls outside of traditional in-house legal department, C-suite strategies and Board-level responsibilities.   

Such was the case in 2020 when Rio Tinto, the world’s largest mining company, blew up ancient and sacred Aboriginal caves located in the Juukan Gorge in the Pilbara region of Western Australia. Described by the company’s own expert as ‘one of the most [archeologically] significant sites in Australia’,^[1] the destruction of the 46,000 year old caves precipitated widespread outrage, a parliamentary inquiry, significant damage to Rio’s environmental reputation and an unquantifiable loss of great historic import.^[2] Many things could have prevented the disaster, including more ESG-focused legal counsel from within and outside the company.

Background

In 2013, the Government of Western Australia granted ministerial approval to Rio Tinto to blast the caves in order for the company to extract eight million tons of high-grade iron ore with an estimated value of $104m.^[3] In 2014, excavations in Juukan Gorge uncovered artefacts of ‘high archaeological significance’. Notwithstanding this discovery, the blast was lawfully detonated on 24 May 2020, destroying the sacred Aboriginal caves, a fully legal act under the Aboriginal Heritage Act 1972 (WA) (WA Act).^[4]  Put differently, Rio broke no domestic law.

The record shows Rio spent over a decade negotiating with Puutu Kunti Kurrama and Pinikura’s (PKKP) aboriginal leaders, conducting technical and cultural studies, and obtaining the necessary permits to carry out the work. The company’s board of directors’ early internal investigation of the incident identified a work culture more focused on securing the ‘necessary approvals and consents’ than in managing key information in an ‘integrated decision-making process’ designed to avert such disasters.^[5]

Social licence to operate: hard law, soft law and all the stuff in the middle

Multinational companies typically employ teams of able lawyers to help them meet their legal obligations. These attorneys (both in-house and external) labour diligently to help their clients follow ‘hard laws’ such as those found in legislation, regulations, securities statutes, contracts and permitting schemes. 

In the last few decades, large global companies such as Rio, and a growing number of smaller ones, have also internally adopted ‘soft’ law principles, most commonly the UN Sustainable Development Goals (SDGs), the Organization for Economic Cooperation and Development (OECD) Guidelines on Multi-National Enterprises, the UN Global Compact and the UN Guiding Principles on Business and Human Rights (UNGPs). These rules do not have traditional enforcement mechanisms but give guidance and flexibility to companies in creating their own internal human rights and environmental standards (notably this trend is changing for larger businesses and public companies as countries^[6] have moved to codify their own ESG due diligence and risk mitigation standards, putting these soft law frameworks into a ‘hard law’ category). They also attempt to promote responsible corporate conduct in situations such as this one, where the WA Act fell short of protecting an Aboriginal site of ‘high archaeological significance’.

Soft laws – aka international instruments – implicated in the case of Juukan Gorge include the UNGPs (identifying a framework to help companies respect human rights), the International Finance Corporation Performance Standards (guiding corporate conduct in developing countries) and the UN Declaration of Rights for Indigenous Peoples (UNDRIP) (promulgating standards for governments and businesses that choose to work in Indigenous communities).^[7] These international instruments, while not exhaustive, advance respect for human and Aboriginal heritage rights while facilitating constructive community development.

It is with respect to this latter category of law that Rio admitted its failure.^[8]  The company rightly adopted numerous standards to guide its activities but put inadequate leadership and controls in place to ensure their achievement and alignment with soft law principles and community expectation, both Aboriginal and more widely.  A sound information pipeline and an experienced ESG legal team might have saved the Juukan Gorge caves, because the conclusion that ought to have been reached was ‘we can but we shouldn’t’.

Although Australia endorsed UNDRIP in 2009, it has not taken steps to adapt existing laws or introduce implementing legislation – naturally limiting a sound rights-based approach. This blind spot was evident with Juukan Gorge.

The Juukan Gorge case shows that companies may be eager to publicise their awareness of adherence to international soft law principles, but that they are slow, reluctant or unwilling to fully institutionalise such principles. For instance, the UNGP guidance highlights the pitfalls of companies tying their human rights due diligence practices to domestic hard law principles only.

The responsibility to respect human rights is not, however, limited to compliance with such domestic law provisions. It exists over and above legal compliance, constituting a global standard of expected conduct applicable to all businesses in all situations. It therefore also exists independently of an enterprise’s own commitment to human rights. It is reflected in soft law instruments such as the Guidelines for Multinational Enterprises of the OECD. There can be legal, financial and reputational consequences if enterprises fail to meet the responsibility to respect. Such failure may also hamper an enterprise’s ability to recruit and retain staff, to gain permits, investment, new project opportunities or similar benefits essential to a successful, sustainable business. As a result, where business poses a risk to human rights, it increasingly also poses a risk to its own long-term interests.’^[9]

Zooming in: gaps in governance and leadership

The Board’s chronology of key events in their report shows Rio had multi-year contracts in place with local Aboriginal groups and that it had identified to them an intention to interfere with the Juukan 1 and Juukan 2 rock shelters to develop its Brockman 4 pit. According to the Board, stronger indication of changing perceptions (by Aboriginal leaders) were not assessed as a matter of urgency at the appropriate level of seniority within Rio Tinto in the days leading up to the incident. Further, 'material new information' about the significance of the rock shelters did not reach members of the pertinent leadership team until a few days before detonation. That new information did not dissuade them from continuing with the blast.^[10] 

Following the incident, on 27 May 2020 Rio stated that ‘We proceeded with our operations at Brockman 4 in reliance on our comprehensive agreement with the PKKP people and having all necessary approvals and consents.’^[11] It apologised that the PKKP’s ‘recently expressed concerns’ did not arise ‘through the engagements that have taken place over many years under the agreement that governs our operations on their country.’^[12] Later Rio statements struck a more conciliatory tone and admitted to leadership and communication failures.^[13]

With respect to specific standards, Rio’s Board found that the company had violated its own internal and international guidelines including International Finance Corp Standard 7, which requires seeking the ‘free, prior, and informed consent’ of Indigenous peoples affected by its operations. 

The Board also identified the company’s failure to adhere to the UNGPs, which prioritises a rights-based approach and respect for human rights, including avoiding disturbance to areas of high cultural significance. Had those principles been followed, the Rio Board said the company would not have chosen a mine design with such a destructive impact. As no review took place against these standards, the Board concluded, ‘heritage considerations were not accorded the priority they deserved in the mine planning decision process.’^[14] 

Rio's 2020 Board review set out the company's commitments to address these and other issues. Its most recent Annual Report meanwhile details how it has 'changed the way' it engages with Indigenous communities. Specifically, its actions include an agreement with the Puutu Kunti Kurrama and Pinikura Aboriginal Corporation to create the Juukan Gorge Legacy Foundation as part of a remedy for the events at Juukan Gorge, which will provide financial support to this traditional owner-led foundation to progress major cultural and social projects, including a new keeping place for storing important cultural materials. It has further established an Australian Advisory Group to provide guidance on current and emerging issues, and 'better manage policies and positions that are important to both Australian communities and our broader business', and engaged the international sustainability company Environmental Resources Management (ERM) to undertake an independent cultural heritage management audit across all of its sites. In May 2022, Rio entered a co-management heads of agreement with the PKKP Aboriginal Corporation. It describes this agreement as 'an important step towards rebuilding our relationship with the Puutu Kunti Kurrama and Pinikura people', which sets out 'how we will work together in partnership on approach to mining activities on Puutu Kunti Kurrama and Pinikura Country.'^[15]

Soon after the incident, Rio’s Board reorganised, with the CEO – who was unaware of the cave blast until shortly before the detonation – and two top executives stepping down. The Chairman and several other directors opted not to stand for re-election and the company made several new appointments to the Board to strengthen its oversight of cultural heritage management and improve its relationship with Indigenous people, including the appointment of the company’s first Aboriginal non-executive director in 2021. Over 60 per cent of the shareholders in Australia and the United Kingdom voted in a non-binding resolution to withhold executive compensation bonuses at the company’s 2021 Annual General Meeting in Perth.^[16] The Board attempted to raise the profile of Aboriginal cultural heritage and ESG in the organisation by creating a ‘social performance’ function that directly reports to a new executive on Rio’s Executive Committee, which is comprised of the company’s most senior executives including the Chief Legal Officer and the CEO. In 2021, the incoming CEO revamped the Executive Team and appointed a new Chief Legal Counsel with ESG (not just securities law) experience and a new Chief Executive of Australia to ‘focus on rebuilding trust and strengthening external relationships across Australia’.^[17]

ERM looked at 37 of Rio’s assets in Australia and around the world and reported in March 2023. While it noted some 'examples of good practice, and in some instances leading cultural heritage management practices', it also highlighted 81 instances of international non-conformance, 60 areas for improvement and 144 recommendations to improve Rio's cultural heritage management.^[18] Rio said it would adopt the report ‘in full’.^[19]

Plugging operational blind spots: what is needed?

Companies need a legal framework and ESG leadership at the highest levels to help them meet the international standards they aspire to follow to prevent disasters such as Juukan Gorge. That ESG leadership should be independent of the operational/money-making side of the organisation. Companies operating in First Nations territories or countries might also consider diversifying their boards to include an independent director with First Nations heritage and/or community-based perspective (Rio has done this now). At a minimum, that kind of diversification could help companies mitigate risk by offering alternative ways of evaluating its business operations. 

The point of this article is not to single out a particular organisation for its regrettable actions, but to learn from those mistakes. After all, Rio is hardly alone in failing to meet the international norms it publicly adopted. An analysis by the Corporate Human Rights Benchmark, a British non-profit, found that between 2020 and 2022, while 66 per cent of 127 large multinational companies it assessed committed to engage with affected communities under the UNGPs, only 29 per cent actually did so, even on a limited basis. The remaining 71 per cent of companies scored zero on their approach to engaging with affected stakeholders on a regular basis.^[20] ‘There is a strong positive correlation between companies’ scores on assigning board responsibility for human rights as well as management and resources for day-to-day human rights functions, and overall human rights due diligence scores,’ the 2022 Benchmark Report found.^[21]

Multinational corporations go to great lengths and expense to introduce internal and other controls to mitigate the risk of financial fraud or operational failures. The same must be true when it comes to ESG – a broad assessment of risk in a business operation by ESG leadership would be a place to start, to uncover blind spots in business operations, especially in circumstances where business operations occur in jurisdictions without human rights legislation or stop-gap heritage laws.  

If the world’s most influential business leaders are to be believed, ESG has joined finance and operations in becoming the third leg of the corporate stool.^[22] As such, it requires an independent structure, expertise and accountability within the organisation to prevent mistakes like Juukan Gorge so that, in the words of Rio, it ‘never happens again’.^[23]

Disclaimer: The views expressed in this article are the personal views of the authors and are purely informative in nature.