Abstract
This article assesses the efficiency of non-judicial grievance mechanisms in providing victims of corporate human rights violations with improved access to remedy. As no such mechanism is currently available, this article formulates a proposal for a new mechanism in the form of a corporate responsibility ombudsman, which would offer a great deal of flexibility as well as being an inexpensive, expeditious and informal manner of dealing with such issues.
The article argues in favour of utilizing states’ regulatory arsenal to improve victims’ access to remedy extraterritorially. Based on recent international developments, I elaborate approaches to human rights due diligence regulation and export credit financing by means of two corporate responsibility ombudsman proposals.
In relation to these proposals, I divide the effectiveness criteria of Principle 31 of the United Nations Guiding Principles into three main categories: empowerment, investigation and enforcement. Since obtaining sufficient evidence is of paramount to those seeking remedies for violations of corporate responsibility, states should bestow quasi-judicial powers on corporate responsibility ombudsmen to achieve efficiency, which could also create legitimacy.
This article provides decision-makers and scholars with insights into how access to remedy could be synchronized with the momentum of human rights due diligence legislation in the European Union and beyond.
Keywords
1. Introduction
Extraterritorial legal solutions to tackle conduct by multinational companies that has an adverse impact on human rights are urgently needed, because at least four billion people are excluded from the benefit of the rule of law and have no access to the essential protections and opportunities that domestic law should provide. 1 Not all kinds of harm caused to individuals as a result of business activities, however, entail human rights violations where interference with rights is insufficient to trigger third party effects. 2 As companies’ economic influence is linked internationally through subsidiaries and supply chains, the states in which those companies domicile have the power to regulate disreputable corporate behaviour. 3
Little legislation was enacted in past decades in the field of business and human rights (BHR). However, the last few years have seen rapid legal developments in this area owing to the introduction of the United Nations Guiding Principles on Business and Human Rights (UNGP) in 2011. 4 Based on the UNGP, human rights due diligence (HRDD) legislation is gaining momentum in the European Union (EU). 5,6 The UNGP comprises a three pillar structure: states have a duty to protect human rights and provide access to remedy, and companies have a responsibility to respect human rights. Based on this framework, companies should, when doing business, take human rights into account through HRDD requirements. 7
Although increasingly legislation is being introduced to regulate corporate conduct, it remains somewhat silent on the consequences of misconduct. Of the UN’s ‘Protect, Respect and Remedy’ framework, the remedy pillar, which entails financial, legal and other sanctions against companies, is the least developed. Aside from its theoretical aspects, the remedy pillar should be developed taking account of the practical approaches to tackle legal obstacles to effective access to remedy. Taking the effectiveness criteria set out in UNGP 31 as its starting point, this article proposes the creation of a new non-judicial grievance mechanism to be presided over by a corporate responsibility ombudsman (CRO) to tackle this challenge.
Section 2 of the article builds on previous ombudsmen institutions in the BHR context and discusses how they have interacted in the past and what impediments to access to remedy they have encountered. There has been a lack of focus on human rights, 8 which has hampered these mechanisms’ effectiveness.
Section 3 proposes a theoretical model, which serves as a litmus test by which to evaluate the minimum requirements of an effective CRO institution. This model sets out the requirements for effective stakeholders’ empowerment, investigative and enforcement powers. The strength of this model lies in the fact that the powers it proposes are based on the UNGP 31 requirements for non-judicial grievance mechanisms, and accordingly build on a widely accepted global framework. On the other hand, however, wider application of such powers remains untested, making this an ambitious approach in practice.
Section 4 sets out two rough CRO models, based on the above approach, for a non-judicial grievance mechanism, which could provide victims with a viable alternative means of obtaining compensation for companies’ human rights violations. Where effective remedial mechanisms exist, companies may find non-compliance less appealing as a business strategy.
2. Using non-judicial mechanism as a response to limited access to remedy in the sphere of business and human rights
A. The ombudsman institution’s usability in terms of business and human rights
As a non-judicial mechanism, the post of ombudsman was first established in Sweden in 1809 to supervise the conduct of government administration and the judiciary. Besides prosecuting public officials, the ombudsman could pursue investigations and make recommendations to the government. As the institution evolved, different countries either adopted this Scandinavian model or the so-called classical ombudsman model, through which ‘soft powers’ of persuasion and seeking cooperation are created. 9
Some human rights ombudsman institutions possess administrative justice and human rights mandates, while others stand close to the human rights commission model. The latter are most frequently to be found in countries that have hybrid or ‘partly free’ democratic regimes, whereas the ‘classical ombudsman model’ predominates in ‘free’ regimes, albeit increasingly operating in conjunction with the human rights commission model. 10
In its Accountability and Remedy project to conduct to enhance access to remedy mandated by the UN, 11 the Office of the United Nations High Commissioner for Human Rights (OHCHR) identifies that ‘the role of the ombudsman is fundamentally to defend the public against wrongful acts or breaches of legal rights by public authorities and/or commercial entities’. 12 Besides supervising the activities of public entities with a view to avoiding maladministration, they may exercise additional roles combined with human rights models. Therefore, as distinct from the purpose of other grievance mechanisms, human rights usually lie at the heart of the ombudsman’s duties. This human rights-based model has been particularly relevant in Africa, Latin America and Eastern Europe. 13 In fact, the number of human rights ombudsman institutions has vastly increased over the course of the last three decades so that now they account for at least 50% of the total number of ombudsman institutions worldwide. 14 Their mandate consists of dealing with specific issues, such as discrimination in relation to protecting children’s rights, women’s rights or the rights of vulnerable groups based on ethnic background. 15
The mandate of an ombudsman may be realized through private sector bodies, including corporations, exercising public functions or having jurisdiction. 16 However, only about 10 out of 43 national human rights institutions (NHRIs) possess full jurisdiction over private sector business. 17 Although ombudsman institutions have been used for several different human rights-related purposes, their utilization has not extended to extraterritorial corporate human rights violations. 18 Despite the 2010 Edinburgh Declaration 19 to foster this, there has been little cooperation to expand their scope beyond national jurisdiction so far. 20 Other ideas conceived at international level to tackle the issue remain at conceptual level. 21
Moreover, as international law continues to lack sufficient mechanisms by which to secure access to remedy 22 , the most viable way forward would appear to be to create extraterritorial mechanisms within national law so that the state’s legislative power may be used to regulate companies beyond its territory if those companies have a domicile in that state. 23
B. The added value of state-based non-judicial mechanisms and their implications
Utilizing the domestic court system on an international scale has proven challenging due to several procedural and practical issues. 24 In comparison to judicial mechanisms, non-judicial mechanisms have been considered as less expensive and less lengthy. 25 In addition to ombudsman services, they include complaints mechanisms, inspectorates, mediation/conciliation services and arbitration and specialized tribunals. 26 Non-judicial mechanisms have additional advantages, such as reduced formality, more immediate and easier access and affordability of out-of-court procedures.
The weak point of these mechanisms is that their mandates have not to date constituted legal enforcement tools. To develop this, consideration should be given to the institutional type and key functions the mechanism provides to remedy human rights violations. 27 Therefore, it is useful to examine different established approaches in order to ascertain best practices for the further improvement of CRO. If the mechanisms are designed or implemented poorly, they can risk compounding a sense of grievance amongst affected stakeholders by heightening their sense of disrespect and disempowerment in the process. 28 Before introducing the CRO model, it is worth taking note of the most frequently utilized state-based non-judicial mechanisms and analysing the shortcomings that erode their legitimacy.
1. National Contact Points as the primary transnational non-judicial mechanism
There are only few transnational mechanisms to remedy business malpractice. Since 2000 the Organization for Economic Co-operation and Development (OECD) National Contact Point (NCP) mechanism has accepted complaints from people harmed by companies’ non-compliance with the OECD Guidelines for Multinational Enterprises. 29 Since 2011 HRDD has also been an integral part of the Guidelines. 30 However, implementation of the OECD’s NCP processes has proven problematic: some NCPs have demanded documentary evidence of abuses in order to allow complainants to participate in the process. 31 In numerical terms, NCPs have rejected 43 of the 250 (17%) cases 32 filed by communities, individuals and NGOs due to loose definitions affecting whether the issue at hand is ‘material and substantiated’, as some NCPs have required complainants to meet disproportionate thresholds of certainty. 33 Furthermore, NCP processes have remained somewhat toothless due to a lack of adequate powers to undertake an effective investigation into the allegations of corporate non-compliance with the Guidelines presented in the complaint. As the NCP’s success depends on the agreement between the parties, it is often the case that the NCP cannot bring added value to a case by investigating the facts. As companies have even lacked a basic willingness to engage with the NCP procedure, 34 there are significant obstacle to the NCPs’ ability to carry out their work.
Moreover, OECD Watch has described accessibility as one of the areas in which NCPs have shown the most need of improvement. As the NCP system continues to suffer from serious structural and operational weakness, advocacy efforts by civil society would be important to reform these mechanisms on a country specific basis. 35 Moreover, the obstacles that stand in the way of effective utilization of the NCP system range from the need to develop technical knowledge and understanding of the OECD Guidelines to receiving the considerable resources necessary to meet the burden of proof that NCPs sometimes require as a prerequisite to participate in the process. NCPs have not facilitated the process of filing a complaint either: they require complainants to pay for the translation of key documents and/or the cost of travelling to mediation meetings at the NCP’s office or other location. 36 Because such requirements easily become practical hurdles that impede victims’ access to justice, the NCP should be required to eliminate all undue burdens to improve accessibility. 37
Whether the issue at hand concerns providing the parties to a dispute with information about the process or about the alleged abuse, the information provided should be as transparent as possible. Lack of transparency usually correlates with a low degree of independence on the part of the mediator. 38 Moreover, a lack of independence is detrimental to legitimacy of the remedy mechanism, as OECD Watch has shown in terms of people’s trust in the NCP system. 39,40 As most NCPs are structured under one single ministry, there is a higher risk of vulnerability caused by lack of independence and perceptions of bias. 41 Given the lack of means to challenge companies and to give adequate redress for complainants, there is a fundamental asymmetry of power in which complaints remain structurally weak. 42 As these evaluations show, the NCP system seriously lacks means to implement effective remedies as required by the OECD Guidelines.
Despite its wide transnational acceptance as a compulsory body by and for the OECD countries, the NCP system cannot function without both companies’ and rights holders’ goodwill. The efficacy of the NCP system calls for more effective access to remedy to be provided for in national settings.
2. National level mechanisms: Canada case study
The NCP system is not the only option as states have experimented with different additional institutional set-ups. For example, in Canada, as a result of earlier setbacks, 43 the country’s first Canadian Ombudsman for Responsible Enterprise (CORE) was established. 44,45 CORE’s official website states that it ‘receives and reviews claims of alleged human rights abuses arising from the operations of Canadian companies abroad in the mining, oil and gas, and garment sectors’. In other words, CORE takes a sectoral approach that is limited to certain types of business. As CORE promotes the implementation of the UNGP and the OECD Guidelines, companies need to adopt HRDD measures in their operations. As to access to remedy, CORE reviews complaints about human rights abuses that are submitted by or on behalf of an individual, organization or community or on CORE’s own initiative. 46
As for the remediation process, CORE ‘offers informal mediation services’. In addition to this, it makes recommendations as to courses of action available to resolve disputes, trade measures that may be taken against companies, company remedies that may be available to those harmed, and reforms to Canadian policies. 47 CORE’s mandate has been criticized because it has not received enough power to compel the production of documents and testimony. 48 Moreover, CORE is connected to the government as it provides advice to the Minister of International Trade on issues concerning responsible business conduct on the part of Canadian companies operating abroad. 49 These close ties to the government lay CORE open to allegations that it lacks the tools to investigate situations and report publicly on its findings and recommendations, including those relating to remedies, harm prevention and reforms. 50 The new order-in-council for the office remains silent on the issue of investigative powers. In the absence of coercive enforcement powers, as in the NCP system, CORE has de facto very few options in relation to impartially determining and reporting the truth. 51
As CORE’s recommendations are non-binding in nature, more concrete remedial tools to compensate victims are required. In relation to criminal offences or alleged human rights abuses likely constituting a war crime, crime against humanity, genocide or torture, CORE will refer cases to the Federal Police of Canada (RCMP). 52 However, no corresponding mechanisms is available in relation to civil law matters.
Without available sanctions and remedies, CORE’s mandate may become limited only to companies that receive explicit financial state support. In respect of companies not financed in this manner, access to remedy in the event of non-compliance with recommendations would entirely depend on the capacity of the Ombudsman’s findings and recommendations to generate public and/or governmental pressure on companies. 53
3. State agencies as administrative-level mechanisms
The third option to establish state-based non-judicial mechanisms has utilized export credit agencies (ECAs), which can be defined as ‘government backed institutions that provide official financing assistance in direct support of its country’s exports’. 54 ECAs represent one of the largest sources of public finance, being ‘extremely important’ for the private sector 55 as up to 80% of global trade benefits from some sort of financial or credit insurance. 56 ECAs are often a necessary export provider for companies that do business in developing and high-risk countries. 57 Taking these circumstances into account, ECAs possess significant leverage to bring about the implementation of HRDD policies, including access to remedy.
Although this article focuses on state responsibility to provide access to remedy, non-state-based non-judicial mechanisms, such as the World Bank’s Office of the Compliance Advisor Ombudsman (the CAO), could increase understanding of financing HRDD. As the primary voice for communities to address concerns to bank officials and shape development projects, the CAO has authority to consider complaints about projects financed by the International Finance Corporation (IFC) or Multilateral Investment Guarantee Agency (MIGA). 58 However, due to its limited mandate, the CAO lacks coercive powers or sanctioning capacity over project proponents of development projects and the IFC/MIGA. On a positive note, by taking part in projects, IFC/MIGA can signal to other investors that HRDD considerations in respect of their policies will be exercised, thus showing moral authority. This leverage has its limits, as it is based on IFC/MIGA’s financial support, which can be extinguished later on by the company concerned. 59 However, companies have increasingly tried to maximize the enhanced financial value that can be created through HRDD, details of which ultimately enter the public domain. 60
To maintain a company’s connection with the dispute resolution function, the CAO should persuade it not to break off the financial relationship. This may be done by strengthening the CAO’s accountability mandate by contractually obliging companies receiving financing to inform communities about the CAO’s complaint mechanism and to participate in the dispute resolution process. Moreover, the CAO could be permitted to render binding decisions or order the bank or company to remedy harms caused by development projects. 61 Financial leverage could also be used to address power imbalances between the parties. Contractual obligations could be used to compel companies to disclose project information to communities, prevent them from forcing concessions from complainants, to respect the autonomy of complainants to select their representatives, and to ensure adequate access by complainants to technical expertise. 62 As the focus of the CAO’s audits has emphasized HRDD conducted by IFC/MIGA, there should be a stronger connection between financing companies and companies’ HRDD compliance in the CAO’s compliance review. 63
Even though it is a non-state-based institution, the CAO’s experiences may be drawn upon by state financial institutions and adapted for use in a national setting. As to ECAs, the government could require similar HRDD policies as the IFC/MIGA have done but states may set stricter conditions concerning the withdrawal of financial support if companies fail to follow these policies. Home and host states must create regulatory environments in which companies can enjoy incentives to undertake preventative measures and financial mechanisms are utilized to help such measures succeed. 64
Despite its potential, the OHCHR’s Independent Expert on Foreign Debt has found that governments rarely exercise due diligence over their ECAs, lacking effective mechanisms to adjudicate upon human rights claims associated with ECA-backed projects and fail to conduct impact assessment in respect of alleged violations. 65 However, Swedish and Dutch ECAs have implemented HRDD policies. 66 According to the Dutch ECA Atradius DSB (ADSB), insuring export transactions and investments abroad should not be ‘associated in any way with issues such as bribery or abuses of human rights’. 67 According to the ADSB Policy Statement on Human Rights, its clients are expected ‘to meet their obligations on human rights and, even if the destination country has a less than perfect record on those rights, to conduct their own due diligence procedure, assess the risks of human rights violation, take measures to monitor and mitigate those risks, and communicate the results’. 68 Other ECAs could introduce similar conditions, under which funding could be withdrawn at an early stage in the event of companies’ non-compliance.
However, due to the international sensitivity of their activities and the confidentiality rule that protects them, ECAs tend to resist efforts to release relevant information only after the transaction was approved and subject to authorization from the client. 69 Consequently, ECAs often fail to conduct proper stakeholder consultations, which leads to inadequate HRDD practices being followed.
Another issue to consider is how ECAs (and companies backed by them) could be obliged to compensate victims of their breaches of HRDD requirements. To date they have not granted adequate access to remedy even in major exporting projects, which raises doubts about providing remedy in smaller projects receiving less public attention. 70 The OECD Common Approaches 71 do not address access to remedy for victims of corporate misconduct supported by adhering state ECAs. Nonetheless, ECAs may operate their own grievance mechanisms. ADSB unveiled such a mechanism in 2018. 72 However, according to the Guidelines of ADSB, the complaint process ‘gives priority to the confidentiality of information above the actual product or outcome’, and go on to state that ‘similar constraints will apply when confidential business information is received during investigations’. 73 It is accordingly likely that ADSB’s investigations and results will not be disclosed, raising suspicion as to whether these processes are independent or transparent as required by UNGP 31. Considering such shortcomings are detrimental to its effectiveness, the CRO needs to act independently from ECAs.
3. Operationalizing UNGP 31 in the context of national CRO mechanisms
A. The criteria for a successful CRO
Based on the impediments of the NCP and other non-judicial grievance models, this section puts forward a theory for how a national CRO model with extraterritorial dimensions could improve the situation. It is essential to emphasize the distinction between extraterritoriality under international law and national laws with extraterritorial dimensions. In international law the dialogue between states, such as in the process of the UN Legally Binding Instrument, 74 differs from the home state duty to regulate: the former retains a clear division of responsibilities between the host state and the home state in the regulation of transnational companies (TNCs), whereas the latter establishes a ‘subsidiary responsibility to exercise control on the TNC over which it may have jurisdiction’. 75 The latter part of this article takes a similar approach of mandatory HRDD to the pioneering national-level legislation of French corporate duty of vigilance law 76 by bringing proceedings within the domestic system when a claim is raised concerning a breach of HRDD requirements. This approach could be enforceable within the framework of tort law as well as, concurrently, through public law measures. In this context, a CRO could be entitled, as a public body, to impose fines or injunctions on a company or to provide other effective remedies. Its enforcement could be akin to rules applying in competition law, consumer protection law and financial services law. 77
Where outcomes of grievances have implications for human rights, sufficient care should be taken to ensure that they are in line with internationally recognized human rights. Because many grievance mechanisms are not framed in human-rights-centric terms, this aim should be given priority. 78 The entire complaints process should reflect a human-rights-based approach: as many victims do not frame their complaints in terms of a human rights issue, CRO should lower this threshold not only in respect of the submission of a complaint but also in respect of the provision of assistance at later stages of the process, thus translating victims’ suffering and the harm caused to them into a human rights issue. In order to be able to address victims of human rights violations and process their claims, CROs require a clear human rights mandate, which should not overlap with those of other ombudsman institutions. Therefore, to avoid the duplication of functions, care should be taken to identify the institution responsible for each function. 79
When looking at improving the third pillar of the UNGP, a distinction should be drawn between access to justice and access to remedy. Access to justice refers to the effectiveness of the remedial mechanisms in place and whether victims have both the opportunity and capacity to access them. On the other hand, access to remedy means the substantive form of redress that is available. 80 What remedy is appropriate varies from case to case depending on the right at issue and the nature of the violation involved, and ranges from prosecution and punishment to compensation for economically assessable damage, restitution, non-repetition, disciplinary action and public apologies. 81 This article will take both concepts (access to justice and access to remedy) into account in considering what amounts to effective access to remedy.
Moreover, the practical implications of ‘rights comparability’ should be clarified. 82 Labour-related disputes may be resolved by providing victims with compensation, achieving reconciliation between the parties to a dispute and restoration of a previous state of affairs. In respect of more serious human rights violations, the mechanism should consider utilizing detection of breaches of law, prevention and deterrence. 83
A CRO may acquire its mandate either from general ‘umbrella’ legislation or from a bespoke regime. 84 Here a comparison can be made between HRDD legislation and ECAs. A CRO monitors the way in which companies carry out due diligence processes in order to identify, prevent and mitigate impacts on human rights and assess how companies address these impacts. 85 This duty may also apply directly in respect of companies’ operations, products or services in the context of their business relationships – extending to relationships with subsidiaries and suppliers – even if they have not contributed to those impacts. 86 HRDD legislation may impose legal liability on companies if damage is caused by companies under their control. 87
B. The litmus test for efficiency
UNGP 31 elaborates the criteria according to which both state-based and non-state-based non-judicial grievance mechanisms achieve legitimacy, accessibility, predictability, equitability, transparency, comparability with human rights and offer a source of continuous learning. 88 These criteria state that victims of human rights violations should receive the necessary resources to be informed and represented within the remediation mechanism. That is to say that the CRO should deliver information about the procedure and provide reasonable access to sources of information, advice, and expertise necessary to engage in a grievance mechanism. At the same time, the criteria require that the CRO has certain powers to resolve the dispute in question. If the other party to the dispute refuses to cooperate, the CRO has the power to investigate and grant a remedy on a unilateral basis. This should ensure that outcomes and remedies accord with internationally recognized human rights.
Therefore, this article proposes that a CRO model must pass the litmus test, which sets the minimum criteria of efficiency. I categorize these as empowerment powers, investigative powers and enforcement powers. As this article proposes, these criteria are complementary, highlighting the need for a CRO to have a broad mandate.
1. Empowerment powers
Imbalances between parties to a dispute represent one of the biggest bars to obtaining access to a remedy. Victims often lack resources, i.e. access to information and evidence, legal advocacy or support and the capacity to engage in negotiation. As Ruggie notes, this reduces both the perception and achievement of a fair process, making it harder to arrive at durable solutions. Affected stakeholders have less access to information and expert resources, which is worsened by a lack of financial resources to pay for them. 89
When tackling the accessibility criterion set out in UNGP 31, there are many practical challenges that need be addressed. 90 A functional grievance mechanism increases victims’ awareness of its own existence and informs them about domestic and foreign companies’ human rights responsibility in their country. The mechanism needs to address challenges concerning language, literacy, costs, physical location and fear of reprisals. 91 Moreover, the OHCHR’s Accountability and Remedy Project suggests that there should be outreach programmes, including multiple entry points for users, provision of designated complaint handlers, literature about policies and processes, taking relevant languages and focus groups (translation services free of charge) into consideration, with special provision for vulnerable groups and those with disabilities. 92
One of the functions of a CRO, and the ombudsman system in general, is to give easy access to legal aid for those who ask for it. Therefore, the legislation on CROs should give the CRO capacity to disclose the information required to handle cases involving human rights violations in a proper manner. This would entail conferring on CROs powers that enable them to ascertain that victims are in a position to make informed decisions and engage in the process effectively.
2. Investigative powers
Equality of arms is a key principle of procedural law. 93 McGregor has noted that non-judicial mechanisms, especially agreement-based mediation processes, are particularly vulnerable to inequality of arms, if the third party decision-maker does not address this risk. Lack of equality of arms appears to be a central limitation in respect of the use of non-judicial grievance mechanisms. 94 Moreover, Enneking states that in foreign liability cases there has been significant inequality of arms as regards financial resources, level of organization and access to relevant information between plaintiffs and their corporate opponents. 95
Traditionally, ombudsmen have been considered neutral arbiters that offer their services free of charge. Therefore, they ask the body concerned and the complainant to try to resolve complaints before commencing an investigation. 96 Resource-wise this is the ideal situation, as this traditional kind of participatory investigation means that the ombudsman is invited to inspect premises, experts are jointly chosen and the parties voluntarily submit (physical) material, which may become a logistical challenge at the international level.
As regulation is usually directly laid down by the state, safeguards to guarantee the independence of ombudsman activities should be put in place. Depending on the regulatory choices made, ombudsmen have powers to receive, investigate and resolve disputes between people and companies. Particularly where dispute resolution outcomes are non-binding, as is the case for those handled by CORE, the CRO may draw on mediation and conciliation techniques to reach amicable agreements between the parties. Furthermore, CROs may have a bigger role in society to investigate and report on systemic problems to foster the fair and proper functioning of markets. 97
The question of a CRO’s limited resources is also relevant in the event of a company’s non-cooperation, which results in failing to obtain the evidence required in order to secure redress. Therefore, the CRO’s mandate, in respect of its duties and powers, should arguably comprise investigative powers similar to those available within judicial mechanisms with respect to the gathering of evidence. 98 However, this would be the case only if no other options, such as reversing the burden of proof in some circumstances, are available.
If prima facie evidence relating to the essential facts of a company’s alleged human rights violation is connected with issues of business competitiveness and confidentiality, the company may be able to argue that business interests prevent it from publishing such evidence. UNGP 31 states that aggrieved parties must have reasonable access to sources of information, advice, and expertise necessary to engage in a grievance process on fair, informed and respectful terms. As for the ombudsman’s mandate and functions, the OHCHR Remedy Project recommends that a state-based non-judicial mechanism should adopt and implement the procedures and practices necessary to ensure that parties to a complaint or dispute receive adequate and timely information (arguments, allegations, documentary and other evidence), and have adequate opportunity to comment on each piece of evidence during the process. Moreover, parties should receive sufficiently detailed written reasons for decisions, as well as readily understandable information concerning the steps to be taken to seek review of or challenge a final decision or determination. 99
The imposition of an unduly high burden of proof creates a substantial barrier that may be compounded by fear or threats of reprisals by companies and local authorities. These issues reduce the usability of the NCP mechanisms to a great extent. Sometimes the NCPs themselves reject complaints on the basis that the burden of proof has not been satisfied. 100 In opposition to this approach, I would suggest that a CRO should continue its investigations if there is no early settlement between the parties to the dispute. However, the ultimate settlement should be done provided that (1) the case at hand is appropriate for settlement by way of mediation; (2) the complainant gave informed consent to mediation; and (3) the relevant facts were known. CRO would have the discretion to approve (or decline to approve) the settlement reached by the parties to the dispute, especially if it is not in line with the objectives of the regulation in question (compatibility with human rights standards). 101
As for the CRO’s independence, the National Ombudsman in the Netherlands offers an example of a regulatory system in which the Ombudsman investigates, on request or of his/her own accord, actions taken by the state’s administrative authorities and other similar authorities designated by or pursuant to an Act of Parliament. 102 Own-initiative investigation are usually based on individual requests the Ombudsman has received, or current discussions in society or in the media. In addition to having the freedom to choose what to investigate, the Dutch Ombudsman has autonomy in determining its timing, its instruments of investigation and its research methodology. 103 However, it is only entitled to investigate state-owned enterprises.
The possession of quasi-adjudicative powers would allow CROs to exercise greater freedom as to the manner in which each case is investigated. In order to avoid frivolous litigation, the CRO could terminate its investigation whenever it is of the opinion that no harm or risk of harm is involved, and that there is no compelling reason to continue the investigation. 104 In such circumstances the law should require that adequate consultation with stakeholders takes place to guarantee that the settlement has been rights-compatible.
3. Enforcement powers
Effective enforcement is essential in order to promote uniform application of HRDD legislation. 105 Questions over the binding nature of a CRO’s decisions and their enforcement are challenging. A CRO’s recommendations should not limit victims’ right to seek judicial redress, and this right should endure all the more strongly in the event of serious human rights violations. A CRO’s participation in investigation into suspected violations that include elements of criminal law need to be carefully considered. In the event that the conduct in question is so heinous (such as genocide, torture etc.) as to fall within the ambit of the national criminal court system, the CRO should defer to the appropriate criminal court jurisdiction. 106
The CRO’s decisions should be enforced in a manner that is compatible with human rights. A CRO that follows HRDD requirements would imply that companies must respect human rights in their operations. As the concept of an effective remedy is strongly influenced by the state’s duty to protect, domestic regulation in this area should be based on compensatory justice: the victim should receive redress that replaces what was lost. This could include a range of forms of appropriate reparation, such as restitution of victims, guarantees of non-repetition, disciplinary action against responsible personnel and public apologies. 107 Moreover, how business and/or local communities (or their representatives) perceive a certain outcome(s) as effective, both objectively and subjectively, should influence the choice of redress. These (positive) outcomes could drive a change in the relationship between company and community and address power imbalances, improve the human rights situation more widely and even reduce the potential for future grievances and harm. 108
The true effectiveness of a grievance mechanism may be measured by whether companies increase their efforts to respect human rights because of the existence of the mechanism in the first place. 109 Moreover, sanctions should be in line with remedies by being adequate, effective and accompanied by prompt redress for harm suffered. The OHCHR has indicated that in cases of severe and irremediable harm, the mechanism should take pre-emptive measures (e.g. in the form of penalty payments or fines), if the company continues to commit human rights abuses, to mitigate the harm. 110 Alternatively, it would be worth considering bestowing on CROs the power to award compensation, or – particularly in respect of export credit financing – to take administrative action (warning notices, or the revocation or suspension of licences). 111
Instead of enforcing more resource-intensive qualitative HRDD standards, the legislator could also harness third-party enforcement action via rights of complaint for interested parties for breaches of procedural due diligence requirements. 112 If the parties reach a settlement in the CRO process, the CRO could monitor compliance. If the outcome is aligned with other (possible) outcomes entailing different non-judicial or judicial processes in which stakeholders are engaged, an effective remedy could be provided in combination with the outcomes of other processes.
4. Institutionalizing CROs: Modest updates to existing mechanisms
Considering the UNGP third pillar is still largely in its infancy, establishing a CRO system to compensate victims of corporate human rights violations might seem quite an arduous task. However, this can be attempted either via the easy route or the hard route. The main difference between them lies in whether the CRO can rely on established policies and regulations, or whether it requires novel legislative initiatives.
A. The easy route: export credit financing
An easier route to access to remedy could be achieved by incorporating CROs into bespoke regimes to supervise state protection of human rights while supporting companies that do business abroad. Taking this route would also require that the legislator grants the CRO additional mandates. However, it may be easier to regulate state-owned agencies than private companies (the hard route). Instead of establishing a CRO in relation to general HRDD legislation, states could exercise governmental steering and regulate their ECAs.
In terms of export crediting and access to remedy, the UN Working Group on Business and Human Rights has concluded that, on the one hand, the ECA itself could institute a grievance mechanism. 113 On the other hand, the ECA could require clients that receive export credit to maintain an effective grievance mechanism in line with UNGP 31. 114 There could also be the third way, involving setting up a CRO to supervise ECAs, as this article suggests. Whichever method is chosen, the ECA’s screening, assessment, support and leverage roles should be drawn up to strengthen (client-level) mechanisms and outcomes for victims. 115 In terms of CORE, the Working Group has clarified that without being independent, well-resourced and empowered to investigate allegations, the ombudsman cannot provide effective and timely remedies and recommendations. Thus, the CRO should have total independence from the government to conduct meaningful investigations. Investigative powers would be necessary to summon witnesses and compel stakeholders to produce document. Moreover, any other powers that are necessary to fully address human rights abuses should be considered. 116
Considering its limited resources to investigate human rights abuses abroad, the success of a CRO will depend significantly on actions taken by victims in terms of grievances and calls for help. Therefore, victims’ fears of reprisals need to be taken seriously. If victims feel that the CRO system is illegitimate and do not want to participate in it, the system will be crippled. 117 The UNGP also notes that ‘states should take additional steps to protect against human rights abuses by business enterprises that are owned or controlled by the State, or that receive substantial support and services from State agencies such as export credit agencies and official investment insurance or guarantee agencies, including, where appropriate, by requiring human rights due diligence’. To follow this logically, the UNGP’s HRDD requirements must be the condition for receiving export credit.
To define the scope of investigative powers, companies financed by the ECA could be obliged to provide evidence on the basis of a reversed burden of proof. This would mean that there would be little need for explicit powers to collect evidence (such as arrest warrants etc.). In the context of export crediting, breaching this requirement would affect the ability to receive financial support. Clear non-compliance with the CRO’s recommendations on the part of a company should also lead to termination of the state’s financial support in other fields of public decision-making. Besides affecting export credit, non-compliance with the CRO’s recommendations could also impose fees and punitive tax increases in other areas, like public procurement and domestic corporate subsidies.
Using financial and administrative sanctions as the primary means of enforcing compliance appears logical in the context of ECAs. A CRO’s mandate connected with the trade export regime could include the possibility to directly remove state support from a company that has violated human rights. In the absence of such direct decision-making powers there is the danger that political motives could influence the decision-making process. Alternatively, should the government decide not to withdraw economic support from such company, the CRO should at least be able to challenge the government’s refusal as being unreasonable under administrative law principles. 118 Upon receipt of a government response, the CRO should have powers to apply to an appellate court for judicial review of the reasonableness of the response. 119 This could serve as a potential enforcement tool.
As to compensation, in clear cases companies could be obliged to remedy victims under their own grievance mechanisms. As for criminal sanctions, the CRO should not seek to remedy impacts that are particularly grave in nature, such as torture, threats to life and human trafficking. 120 Furthermore, in such cases rapid financial sanctions and deeming the company ineligible for state support in the future are not constructive. As the case law in this field is very limited, further research should be done as to what kinds of arrangements might be made.
Despite strategic business interests and corporate-sensitive behaviour, transparency should be fostered in terms of access to remedy. If the grievance mechanism lacks independence, the CRO cannot investigate and the public cannot satisfy itself as to whether public officials and agents abide by human rights friendly guidelines, statements or norms. 121 By acknowledging UNGP 31, both the ECA and CRO need to become a source of continuous learning: the mechanisms must include exchanges of views with rights-holders so that findings of non-compliance, the mitigation measures required and consideration of rights-holders’ human rights are included in the decision-making process. 122
B. The hard route: HRDD legislation
In view of the coming wave of HRDD legislation in Europe, 123 there is increasing potential to regulate companies by means of domestic laws that have extraterritorial dimensions, as stated above. As ECAs may leverage their financial agreements to achieve compliance with HRDD legislation, such legislation has only a limited effect. The establishment of regulations containing mandatory HRDD provisions would allow CROs to monitor corporate compliance with the standards enshrined in these provisions and grant explicit access to remedy. CROs could also report on the regulation’s effectiveness and make recommendations for improvement. As national HRDD legislation may vary between EU Member States, cooperation between national CROs could lead to the production of guidelines by which to harmonize the diverse regulations in existence. 124 Based on the litmus test for the creation of the CRO mechanism, there are a few key elements mandatory HRDD legislation should include.
First, to increase victims’ empowerment powers, victims need assistance: considering the limited capacity of CRO’s good offices, drafters of HRDD legislation could consider enabling local NGOs or other competent actors to file a complaint on the victim’s behalf. 125 Alternatively, the legislation could also require companies to set appropriate measures to inform their employees or other key stakeholders of their rights and the CRO’s remedial mechanism. As the financial costs of bringing claims remains one of the most significant barriers to access to justice, CROs should introduce minimal user fees, advisory services, filtering and redirection processes, procedures that allow for self-representation, innovative use of IT and communications technologies, techniques for managing expert testimony, close case management and flexibility with respect to costs awards. 126 Active stakeholder consultation and engagement are essential to enhance this in the most effective manner and may even facilitate the resolution of cases at an early stage in collaboration with companies’ own grievance mechanisms.
Before deciding to investigate a case, a CRO should give any affected party reasonable notice and an opportunity to respond. Companies’ sustainability reports, in which companies state their due diligence duties in operations and supply chains, would be a logical starting-point for this process. The CRO could additionally ask companies for specific information about alleged acts or omissions that have caused or contributed to harm in a foreign state, or where there was a significant risk that such harm would be caused. 127 In practice, the CRO should decide how to allocate its investigative resources. If the CRO’s work relies on cooperation with companies, the HRDD law could require that companies establish a position of compliance officer, who would be responsible for implementing legal requirements. 128
If a company has not acted in accordance with HRDD requirements, resulting in human rights abuses, it should be possible to discharge civil liability when a company has not taken all due care to comply with its HRDD requirement. 129 In fulfilling the UNGP 31 criteria of equitability, the principle of equality of arms needs to be borne in mind when considering where the burden of proof lies in respect of alleged human rights abuses. If a reversed burden of proof applies – i.e. companies must prove that the abuse did not occur due to lack of compliance with HRDD legislation on their part – this will potentially shift the power balance in victims’ favour, thus decreasing the CRO’s need for investigative powers.
However, if the HRDD legislation does not reverse the burden of proof in this way, victims would bear the burden of proving their cases, which is to say that they would need to provide prima facie evidence to support their claim that the due diligence requirements were not met. 130 In this case, the CRO would play a pivotal role in guaranteeing that the procedural principle of equality of arms is fulfilled in fair and respectful terms. If victims belong to vulnerable or marginalized groups, CRO must pay additional attention to the facilitation of the process.
Considering CRO’s limited resources to handle complaints, there should be a way to undertake a single investigation into multiple complaints about the same topic to avoid duplication and excessive cost. 131 To make this possible, the legislation should provide for a mechanism that offers collective redress, which also reduces victims’ costs in larger human rights violation investigations. 132
The last part of the litmus test is to provide the CRO with enforcement powers in the event of non-compliance with the HRDD legislation. The Finnish Non-Discrimination Ombudsman (NDO) offers a potentially useful model in this regard. 133 First, the NDO has been widely influential in society owing to its legitimacy concerning matters of non-discrimination, as the Nordic ombudsman model goes beyond the ‘soft law’ character of the classical ombudsman model due to having additional powers to protect legality. 134 The Swedish and Finnish Ombudsmen’s functions include a supervisory role of assessing whether the national government and local authorities as well as civil servants (and even the courts) obey the law and fulfil their obligations. 135 The NDO’s mandate also covers private entities such as companies. 136 As the NDO’s task is to supervise the protection of individuals against discrimination in accordance with the Non-Discrimination Act, a CRO would likewise guarantee companies’ compliance with the HRDD legislation.
Despite several difficulties concerning submitting claims to a CRO, the mechanism enjoys a few benefits vis-à-vis judicial mechanisms. However, if judicial enforcement is needed, there should be a mechanism by which to transfer the complaint to the judicial system. To avoid situations in which different mechanisms work in isolation from each other, the CRO’s enforcement powers could be linked to a mechanism similar to the National Non-Discrimination and Equality Tribunal of Finland (hereinafter ‘the Tribunal’), which acts as an impartial and independent judicial body.
Like the NDO, the Tribunal supervises compliance with the Non-Discrimination Act both in relation to private activities, including those of companies, and public administrative and commercial activities. The Tribunal serves as a low threshold ‘ancillary mechanism’ to reconsider the case: if the NDO decides not to proceed with a claim, the claimant is entitled to appeal in person. 137 Unlike the NDO’s recommendations, the Tribunal’s decisions are binding. In terms of the range of sanctions available, the Tribunal may prohibit repeated or continued discrimination or victimization. Besides considering injunctions, the Tribunal has powers to impose a conditional fine to enforce injunctions or even to order payment of such a fine. To do this, the Tribunal can oblige the party concerned to act within a specific time frame to obey the Non-Discrimination Act. From a victim’s perspective it is an advantage that the Tribunal considers petitions free of charge and it does not charge service fees. 138
If the Tribunal finds that the law has been breached, a victim seeking compensation may still need to submit an application to the administrative court, as the Tribunal does not have the power to order the payment of compensation, but may only make a recommendation in this regard. However, considering the high degree of legitimacy of the Tribunal’s decisions, the breaching party may accept the amount of compensation recommended in the decision. 139 Despite the Tribunal’s lack of power to order compensation, it may provide strong argumentation (similar to that set out in a preliminary ruling) that may encourage victims to go ahead with civil proceedings. In view of the reputational damage and other negative consequences to business activities, a company held in breach by the Tribunal may consider compensating victims to avoid such proceedings. Mutatis mutandis, if the Tribunal finds that a company has violated the HRDD legislation (possibly adhering to the CRO’s recommendations), the company may agree to pay the compensation that Tribunal finds reasonable and just. The NDO and Tribunal are, however, the result of a longstanding Nordic tradition. Thus, establishing a CRO this way may not be so simple in other states.
5. Conclusions: CRO: potential, pitfalls and national proliferation
Creating provisions for access to remedy, pinpointing liability and adopting enforcement measures at national level should be key features of any regulatory initiative to enhance companies’ responsibility to respect human rights. Due to severe institutional drag, however, novel and slightly more modest grievance mechanisms can facilitate the transition. Against this backdrop, this article has argued for the development of standalone CROs to assess and identify adverse impacts, to act upon findings in order to curtail human rights violations, to impose sanctions on wrongdoers and provide remedies to victims.
As mere disclosure-oriented HRDD legislation would only have very limited effect on the remedy pillar of the UNGP, this article introduced a plain model for CRO, which may provide access to remedy and enforcement powers as a national body. Taking a note of the article’s litmus test, well-functioning HRDD legislation could provide necessary ‘teeth’ for the creation of an effective and legitimate non-judicial mechanism. Whether it is engaged in creating new HRDD legislation or revising governmental steering policies, the CRO must have a clear independent mandate, including powers to inform and be informed, and ultimately be capable of implementing its conclusions based on UNGP 31.
Ultimately, national CROs should be complemented and harmonized by national ministries and an EU-level body, as the effectiveness of implementing and supervising any regulatory initiatives is contingent on good cooperation between different government departments or Directorates-General within the EU. For the time being, however, the proliferation of CRO institutions hinges on the will of progressive national lawmakers to create HRDD legislation. Considering the rise of national sustainability laws across the world, the harmonization of the CRO system with HRDD legislation may occur in a shorter timespan than previously anticipated.
Footnotes
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author received annual research grant for the research of this article from Suomalainen Lakimiesyhdistys.
