This article was first published by Practical Law on 11 July 2016, available here.
This article looks at the International Bar Association’s guidance on applying the UN Guiding Principles and provides information on steps that law firms can take to be seen as counsellors on business and human rights issues as well as trusted advisors.
What is the role of lawyers advising companies in today’s globalised and rapidly-changing world? Is it to advise companies on the application of the law, solely, or is it to advise on the law combined with legal trends and relevant soft law guidance? In the words of Ben Heineman, William Lee and David Wilkins: is the lawyer a technical expert, wise counsellor or effective leader? (Lawyers as Professionals and as Citizens: Key Roles and Responsibilities in the 21st Century, Center on the Legal Profession at Harvard Law School, 2014).
Lawyers have been confronted with this question a number of times in recent years. For instance:
- Where the law establishes a cap on the acquisition of lands to benefit small peasant farmers, can a lawyer advise its corporate client to set up a large number of shell corporations to make small land purchases that, individually, would not violate the letter of the law?
- Where the law legalises work by children, can a lawyer advise its corporate client on local employment law without stating the law’s contradiction with International Labour Organization standards?
- Where corruption is prevalent in a country, can a lawyer advise on land ownership without advising that the legal title being relied on may have been acquired through corrupt practices and damage to neighbouring communities?
- Where a company acquires a target company that is responsible for human rights violations, can the lawyer carefully structure the transaction so as to only acquire the assets that do not carry the obligation to provide remedy?
- Where a company enters a joint venture, can the lawyer prioritise advising on how the company can restrict its media exposure if the joint venture causes adverse human rights impacts, instead of advising on appropriate measures to prevent these impacts from taking place?
- Where international embargoes prevent the supply of materials to a regime that is militarily attacking its population in a civil war, can the lawyer establish offshore corporations to enable its corporate clients to continue supplying these materials?
The International Bar Association (IBA), the global voice of the legal profession, which brings together over 190 bar associations and over 80,000 individual members in over 160 countries, pronounced itself on this question in May 2016. In its Practical Guide on Business and Human Rights for Business Lawyers (Practical Guide), the IBA makes it clear that:
- Lawyers, both as in-house counsel and as members of law firms, increasingly need to take human rights into account in their advice and services.
- The UN Guiding Principles on Business and Human Rights (UNGPs) have implications for the management of law firms as business enterprises and which operate within a business environment, with their own supply chains and employment practices.
The Practical Guide reflects 18 months of research and consultation inside and outside of the IBA, including pilot projects with bars in Europe, Africa, and Central America. It was drafted by a working group of international lawyers, and chaired by John Sherman, General Counsel of Shift and legal adviser to John Ruggie, former Special Representative to the UN Secretary General on business and human rights.
Advantage for the legal profession of considering the UNGPs
The IBA specifies that, although the UNGPs do not have the force of law and are not legally binding, there are a number of reasons why it is requesting lawyers and law firms to pay attention to them. These include the fact that the UNGPswere unanimously endorsed by the UN Human Rights Council and are regarded as the global authoritative standard on business and human rights; that they are increasingly reflected in a range of instruments (ranging from law and regulation to commercial agreements and policies and processes of companies); and that there is a growing recognition that a strong business case exists for respecting human rights.
The IBA further points to a number of opportunities for lawyers who are aware of the implications of the UNGPs for their client’s businesses and the legal advice they provide:
How the UNGPs apply to lawyers
The IBA provides for three scenarios where lawyers will wish to be aware of how the UNGPs intersect with their legal practice:
The IBA notes that the law is not static, but is dynamic and evolving. What is considered unethical and a reputational risk today may well be unlawful tomorrow. The IBA recognizes that a firm’s ability to engage in this area, where the human rights impacts are not explicitly addressed by hard law, may be limited: this possibility will depend on whether the client sees the lawyer as a wise professional counsellor or trusted advisor. This status of wise counsellor is not automatically granted by the client, who may instead be solely seeking advice on compliance with the law. Accordingly, the IBA provides a number of steps that law firms can take to help it be viewed as a counsellor on business and human rights issues and therefore include consideration of soft law in the advice its lawyers provide:
Considering the implications of the UNGPs for lawyer’s day-to-day legal practice does not necessarily mean advising clients on the implementation of the UNGPs, such as the drafting of a human rights policy and conducting human rights due diligence. Rather, this entails considering how legal advice can be provided in a way that will assist clients in their respect for human rights. The IBA notes that the UNGPs are relevant to many different areas of legal practice, and lists the following practice areas as particularly relevant:
The IBA provides general reflections on these practice areas, such as noting that the insertion of boilerplate human rights provisions into contracts, which the parties do not understand and regard as formality, will likely not lead by themselves to improved human rights performance. Additional guidance for lawyers on how the UNGPs apply to these legal practices will be contained in the Reference Annex, which is being drafted by the Working Group that prepared the IBA Practical Guide, and is scheduled to be published in August.
How the UNGPs apply to law firms
Law firms are unique service providers that operate very differently to companies. Lawyers are subject to strict professional duties. Their communications with their clients are protected by confidentiality. They have a duty of independence and act in the best interests of their clients.
Law firms will therefore typically have a range of questions on how the UNGPs may apply to their organisation, including:
Do the UNGPs apply to law firms?
The IBA makes it clear that law firms, as business enterprises, have their own responsibility to respect human rights. In a similar manner to the companies they advise, law firms are asked to commit to respecting internationally recognized human rights, assess the firm’s potential human rights impacts (including the firm’s employment practices, supply chain, and the legal advice and services it renders), and take action to limit its involvement in human rights impacts. The law firm’s employment and supply chain practices, which can include, for instance, sourcing office supplies, back office support, cleaning staff, canteen workers and client entertainment, is therefore treated no differently to the employment and supply chain practices of other companies subject to the UNGPs. The IBA focuses in this Practical Guide on how the law firm can seek to avoid being connected to human rights impacts through its provision of legal services.
Do the UNGPs hinder the lawyers’ ability to provide a robust defence to allegations that a client is engaged in conduct that violates human rights?
Influencing the client to avoid or mitigate human rights impacts could be seen as infringing on the lawyers’ independence. The IBA notes that care must be taken not to inhibit the exercise of the lawyers’ professional responsibilities. The IBA makes it clear that the UNGPs require neither lawyers nor law firms to implement them in a manner that restricts the right of access to legal counsel for independent advice and services. They do not infringe on the right of businesses to undertake, and the obligation of legal counsel to provide, a robust defence to allegations that the business engaged in conduct that violates human rights, to seek judicial determination of human rights issues, and to provide legal advice, even where the issue is highly controversial.
Do the UNGPs require my law firm to terminate a client relationship if the client infringes on human rights?
This has been a question of much concern to law firms, with a number mistakenly believing that implementing the UNGPs automatically entails the obligation to stop advising clients that violate human rights. This is not the case and the IBA makes it clear that although the UNGPs suggest the law firm consider withdrawing from a client relationship if the client persists in infringing on human rights (notwithstanding the firm’s advice), withdrawal is a last resort, and may not be legally permitted in any event. The IBA further indicates that staying in the relationship and continuing to try to persuade the client to prevent and mitigate human rights impacts may serve the purposes of the UNGPs better than withdrawal.
How is my law firm supposed to communicate its human rights approach when its advice to clients is confidential?
The UNGPs encourage business enterprises to communicate externally how they address their human rights impacts. This can be problematic for a law firm where its advice to clients is typically covered by attorney-client confidentiality. The IBA recognizes this conundrum and states that although a firm may not disclose the specifics of its legal services, it should be able to provide anonymised and aggregated information to explain generally how it is implementing its commitment to respect human rights. Indeed, law firms are increasingly seeking ways to communicate their seriousness in approach to the UNGPs. The IBA adds that the purposes of the UNGPs are better served if the firm focuses on whether the client is prepared to communicate its approach on human rights where appropriate and necessary.
Is my law firm supposed to provide remedy where it is involved in impacts?
The UNGPs state that a business enterprise has the responsibility to provide remedy for a human rights impact that it caused or contributed to. The IBA positions that when it comes to the services and advice it renders, the provision of remedy by a law firm for an adverse human rights impact by a client that the firm contributed to, is highly problematic. Other than in cases of illegal or unprofessional conduct by the firm resulting in a human rights violation arising from its legal services and advice, the IBA states that the purposes of the UNGPs would be better served by making the business case to the client to provide or co-operate in legitimate processes to remedy human rights impacts that the client caused or contributed to. The IBA specifically pronounces itself on remedy involving impacts tied to the advice provided to clients. The UNGPs’ expectation of remedy beyond this, for instance in the law firm’s work force or supply chain practices, would be similar to that of a company.
Looking forward: how the IBA Practical Guide will shape the legal profession
John Sherman, who chaired the working group that drafted the IBA Practical Guide, clarifies that the IBA is not “dictating standards of conduct for the legal profession. The only organisations that can set such standards are regulators, such as bar associations”. He further summarizes the two key reasons for why lawyers should pay attention to the UNGPs where they aren’t reflected or embedded in hard law:
“First, violating soft law norms, such as the UNGPs, can have hard consequences. Second, the law is not static. It is dynamic and evolving. The last five years has seen a trend of increasing incorporation of the UNGPs into laws, regulations, and financial and commercial transactions, and the policies of leading companies. If history is a guide, this trend will continue.”
Stéphane Brabant, member of the IBA’s working group as well as former Co-Chair of the IBA’s CSR committee and Co-Chair of Herbert Smith Freehills’ Africa practice, remarks that “businesses’ responsibility to respect human rights in their supply chains is no longer an option. Lawyers advising businesses need to advise their clients accordingly to mitigate the risks related to adverse human rights impacts in their clients’ activities. These risks are present along the supply chains and can impact all stakeholders, from those directly or even indirectly involved in the production of goods to those who use such goods. The Practical Guide will help lawyers navigate this new and developing field of business and human rights and captures the relevance of this field for a number of legal practices, including corporate, M&A, disputes and project finance.”
The IBA Practical Guide comes at an opportune time for law firms. A growing number of in-house lawyers are considering their role in helping protect their company from involvement in human rights impacts, and are looking to their external counsel to provide advice that assists in this process. Although an important foundation, legal compliance alone does not protect a company from involvement in human rights harm, reputational damage, investor scrutiny or complaints lodged with the OECD National Contact Points (which assess company conduct against the UNGPs rather than hard law). It is time for business lawyers to provide the legal advice that companies need as they navigate these increasingly murky waters.