Why Arbitrate Business and Human Rights Disputes? Public Consultation Period Open for the Draft Hague Rules on Business and Human Rights Arbitration

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In June 2019, the Draft Hague Rules on Business and Human Rights Arbitration (hereafter, “Draft BHR Arbitration Rules”) was released for global online public consultation, with the consultation period set to end by 25 August 2019.  Judge Bruno Simma chairs the global Drafting Team that has collaborated in developing the draft rules, since the Drafting Team started its work in January 2018 with the support of the City of the Hague.  (Drafting Team Members and Working Group Members all listed here.) The final version of the Hague Rules on Business and Human Rights Arbitration will be published on 10 December 2019.  Before the release of the Draft BHR Arbitration Rules, the Working Group had produced a 2017 concept paper on business and human rights arbitration.  This was followed by the creation and first meetings of the Drafting Team in January 2018; the Drafting Team’s production of its Elements for Consideration in Draft Rules, Model Clauses, and Other Aspects of the Arbitral Process in time for the November 2018 Online Consultation Procedure; the April 2019 meetings of the Drafting Team and the June 2019 publication of the Summary of the Sounding Board Consultationsup to the June 2019 release of the Draft BHR Arbitration Rules.  

As described in the Draft BHR Arbitration Rules:

“The Hague Rules on Business and Human Rights Arbitration provide a set of procedures for the arbitration of disputes related to the impact of business activities on human rights.  The Hague Rules are based on the UNCITRAL Arbitration Rules, with modifications needed to address certain issues likely to arise in business and human rights disputes.  As with the UNCITRAL Arbitration Rules, the scope of the Hague Rules is not limited by the type of claimant(s) or respondent(s) or the type of subject-matter of the dispute and extends to any disputes that the parties to an arbitration agreement have agreed to resolve by arbitration under the Hague Rules.  Parties could thus include business entities, individuals, labor unions and organizations, States and State entities and civil society organizations. Equally, the Hague Rules purposefully do not define the terms “business”, “human rights”, or “business and human rights.” For the purposes of the Hague Rules, such terms should be thus understood at least as broadly as the meaning such terms have under the UN Guiding Principles on Business and Human Rights. However, in the vast majority of cases, no definition of these terms should be necessary at all.

Like the UNCITRAL Rules, the Hague Rules do not address the modalities by which the parties to the arbitration may consent to it nor the content of that consent, which are matters for the parties. Consent remains the cornerstone of business and human rights arbitration, as with all arbitration, and it can be established before a dispute arises, e.g. in contractual clauses, or after a dispute arises, e.g. in a submission agreement (compromis). Model Clauses may provide potential parties with options for expressing their consent to arbitration. In addition, like the UNCITRAL Rules, the Hague Rules do not address enforcement of arbitral awards made under these Rules, which are governed by national law and various treaty obligations, including in most cases the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. While these Rules have been conceived as a uniform set of rules, we acknowledge that the parties remain entitled to exercise their discretion in opting out of certain provisions that do not respond to their specific needs as arising out the dispute at issue. Certain other Model Clauses are being developed in this respect.” (Emphasis added.)

I have served in the Drafting Team under Judge Simma’s leadership since January 2018. My colleagues Martin Doe, Steve Ratner, and Katerina Yiannibas have helpfully crystallized elsewhere several of the main points of innovation contained in the Draft Rules, such as:

“1. provisions on facilitating settlement and mediation, and emphasizing the complementarity of arbitration to such procedures as the OECD National Contact Points system (Articles 1(6), 17(3), 42, and 51)

2. provisions to address the inequality of arms which may arise in such disputes (inter alia, Articles 5(2), 20(4), 24, 27(2), and 27(4));

3. the establishment of the Permanent Court of Arbitration as the default appointing authority, given its intergovernmental nature and experience in business and human rights disputes (Article 6);

4. procedures for multiparty claims and joinder by third parties (Article 17-bis);

5. a procedure for the early dismissal of claims manifestly without merit, developed on the basis of similar procedures in the ICSID, SIAC, SCC, and HKIAC Rules (as well as the proposed new ICSID Rules) (Article 23-bis);

6. provisions making the arbitral tribunal’s power over interim measures more robust, and at the same time more flexible (Article 26);

7. an emergency arbitrator mechanism elaborated on the basis of the ICC and SCC Rules (Article 26-bis);

8. specialized evidentiary procedures drawn up on the basis, inter alia, of the IBA Rules and Rules of the International Criminal Court, among others (Articles 27, 28, and 30(3));

9. measures to protect the identity of parties, counsel, and witnesses where such protections are warranted by the circumstances of the case, while ensuring due process is maintained for all parties (Articles 17(5), 28(3), and 37(5));

10. provisions on transparency and third-party participation (Articles 24-bis and 33-38);

11. tailored provisions on remedies in the business and human rights context (Article 40);

12. rules on applicable law that enhance flexibility and party autonomy (Article 41);

13. rules to protect the public interest in the case of confidential settlements (Article 42(1));

14. nuanced rules in respect of costs and deposits that encourage the tribunal to sensitive to the interests of access to justice (Articles 46-49);

15. an expedited arbitration procedure for small claims (Article 52); and

16. a Code of Conduct that reflects the highest standards for independence and impartiality in international dispute resolution (Annex).”

In this post, I do not aim to provide an authoritative commentary on the Draft Rules (which is exactly what our global online consultation procedure is for).  Rather, and notwithstanding the explicit caveat drawn by the Drafting Team above on leaving the modalities and content of consent to arbitration to the parties, I instead offer my personal observations to examine the essence of main criticisms (see public comments of the Columbia Center for Sustainable Investment here as well as a few questions and comments I received at Harvard Law School in April 2019), directed against having the BHR Arbitration Rules in the first place: 1) whether companies and human rights victims would even consent to arbitration; and 2) if they do consent, whether one should view that consent with skepticism as to the authenticity of arbitration as a mode of access to justice for human rights victims.  The gist of my argument is this: while the BHR Arbitration Rules will never purport to be the exclusively prescribed mechanism for human rights victims of transnational business conduct and neither does it presume to displace State-based judicial or non-judicial remedies, against the realities of a continuing limited universe of legally binding human rights recourse against the impacts of private transnational activities, we cannot afford to close off the arbitral option either. As human rights practitioners well know, no single dispute resolution mechanism for human rights disputes against transnational business is perfect, and even recent national court victories in Lungowe v. Vedanta (as spearheaded by my BHR Drafting Team colleague Richard Meeran of Leigh Day) depend on the jurisdictional openness of a State’s judicial system to transnational tort claims.  The question, in my view, thus has to be reframed away from “why international arbitration?“, to “why not also international arbitration?“.

‘Suitability’ of International Arbitration to Human Rights Disputes : the Right Question to Ask?

There has been so much densely written by scholars and practitioners alike (myself among them) about problems associated with various features and aspects of international investment arbitration (see among the multitude of criticisms, here, here, here, here, here, and here) that it seems almost inevitable to ask the question about the suitability of international arbitration as a dispute settlement mechanism for business and human rights disputes.  (To recall, EJIL:Talk! regularly features posts on the UNCITRAL Working Group III on ISDS Reform, as well as those from the UNCITRAL Academic Forum.). Asking this question, however, invites a premise that there is supposedly something inherently unsuitable about international arbitration for a human rights dispute.  From where I stand, that premise remains unproven, and yet, as Susan Franck’s brilliant book (Arbitration Costs: Myths and Realities in Investment Arbitration, OUP 2019) reminds, negativity bias can occlude how we create or generate unspoken premises: “rather than focusing on the value generated by investment, identifying the scope of investments that do not generate disputes, or identifying decisions where cost decisions operated in a party’s favor, stakeholders become focused upon the negative information related to formal dispute settlement.  When people focus, negative information commands more attention than positive information, and negative events elicit more rapid and prominent responses than non-negative events.” (Franck, at p. 41).

If one even begins to recall the origins and nature of international arbitration as a means of delocalized, arms-length, and impartial dispute settlement for parties of different countries, opposing religious traditions, different systems and cultures of belief, among others who, in the ordinary course of circumstances, had no reason to trust the other (e.g. on the role of international arbitration from medieval Europe to Hugo Grotius’ De Jure Belli Pacis, see Henry Fraser’s interesting 1926 Cornell Law article; see also W.L. Westermann’s 1907 article on Interstate Arbitration in Antiquity  on how international arbitration was devised to settle boundary disputes, water rights, war claims, and even torts between city states within Ancient Greece and its rivals; or even my 2011 Academie du droit de l’arbitrage essay on why international arbitration is a form of international justice), why should it be so readily dismissed as a form of dispute settlement for the particular case of human rights victims claiming against transnational corporations whose reach and mobility transcends any single national jurisdiction?  What is it about the particular nature and contours of human rights disputes against transnational corporate activities that somehow is automatically decisive for some against the suitability of international arbitration, excluding it from all the forms of dispute settlement currently open to human rights and business disputes?  

In this respect, the unproven premise of alleged ‘unsuitability’ of international arbitration, all based on the unique backlash against investment arbitration, is itself not enough to carry the argument. If the historic Bangladesh Accords Arbitrations are any indication, there ARE indeed some States, some private sector transnational businesses, and some human rights claimants who are indeed willing to consent to business and human rights arbitration, and who could thus be open to the BHR Arbitration Rules.  (If our Sounding Board and public consultation procedures are also any indication, that openness to international arbitration for business and human rights arbitration does also exist for some, even if not for all business and human rights stakeholders.). Certainly, the ongoing public consultation procedure hopes to invite all stakeholders to weigh in on their preferences for resolving transnational business and human rights disputes.

Would International Arbitration Provide ‘Authentic’ Access to Justice for Human Rights Victims?

Concerns have of course been discussed regarding perceptions of international investment arbitration as somehow asymmetrically resorting to a “private” mode of justice for resolving what is inherently a “public interest” dispute (see for example here, here, and here).  But this line of reasoning does confuse one as to what is truly ‘private’ in international arbitration in the first place.  To the extent that parties consent to their form of dispute resolution as arbitration through either an arbitral clause, arbitral agreement, or compromis, it is clear that the private law of contract applies.  But the private law of contract does not exist in a disembodied sphere.  International arbitration is possible only because of State support for the intentions of contracting parties through the law of contract. States’ own laws mandating that courts refer parties to arbitration in the presence of an arbitral clause, arbitral agreement, or compromis submitting such a dispute to arbitration (and assuming the arbitrability of the dispute) are themselves completely public in nature and thus also a “public” access to justice mechanism in its own way.  To the extent that international arbitration even exists, it is because States create this procedure as a mode of dispute resolution, States permit parties to avail of this mode of dispute resolution, and States recognize and enforce arbitral awards in their respective jurisdictions.  There would be no international arbitration system – no international arbitrators appointed, no international arbitration centers, no international arbitration laws – if States (the very epitome of what is public) did not themselves create and support this hybrid public-private mechanism of dispute resolution in the first place.  Thus, if one asks about the ‘authenticity’ of access to justice mechanisms as somehow traceable to just State-based or State-created mechanisms (see Judith Resnik’s fascinating 2015 article Diffusing Disputes: The Public in the Private of Arbitration, the Private in Courts, and the Erasure of Rights), one also has to ask why international arbitration is any less ‘authentic’ as a mode of access to justice when States themselves enable it.

Most importantly, however, my main reason for participating these past years in the Drafting Team for the BHR Arbitration Rules under Judge Simma’s leadership is a shared understanding of the ongoing limits of remedies for human rights victims of transnational corporate conduct.  International human rights litigation against transnational/multinational corporations has had variable results in different countries and concomitantly, many points for jurisdictional resistance that could result in a judgment for human rights claimants taking place many years after the fact of violations committed. As I’ve had many occasions to observe here (see here, here, here, here, here, to name a few), the path for international justice for international human rights claimants against transnational corporate activities is laden with jurisdictional hurdles, evidentiary burdens, resource disparities, political asymmetries, sociological and situational differences.  International human rights claimants may be uniform in their desire for justice but they are just as diverse when it comes to the translation of that desire into concrete legal relief.  To the extent that the proposed business and human rights treaty can provide needed assurances for some international human rights claimants through the acculturation of corporate social responsibility, we should all welcome this development. To the extent that transnational litigation of torts against corporate actors is gradually expanding in places such as the United Kingdom, we can all welcome this development. To the extent that international arbitration can widen the net of coverage for international human rights claimants against transnational corporate conduct, this could also be just as welcome.  At the very least, it is my hope that the global public consultation procedure enables deeper scrutiny from all quarters (whether critics, proponents, scholars, practitioners, stakeholders of business and human rights) into the BHR Arbitration Rules as another possible tool for justice in international human rights.

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