Corporate Accountability for Human Rights Abuses in Asia: Critical Reflections on Lessons from Europe

In this article I will develop two arguments. First, I will try to show that regulatory developments in Europe as well as at the international level in the last decade tend to show that no single regulatory initiative – soft or hard, domestic, regional or international – alone would be effective in preventing and redressing human rights abuses by businesses. Second, I will suggest that binding regulation at both national and international levels is critical to enhance the efficacy of non-binding regulatory initiatives and also control a ‘race to the bottom’ prevalent in the business and human rights (BHR) field. States in Asia, which compose a vital but complex region of the world, should keep these two lessons in mind while developing their regulatory regimes of corporate accountability for human rights abuses. Part I will offer critical reflections on selected legislative, judicial and non-judicial developments within Europe in relation to corporate accountability for human rights abuses. The principle of separate legal personality operates as one of the major barriers in victims’ quest to hold parent companies accountable for human rights abuses linked to their subsidiaries. In view of difficulties in piercing the corporate veil, the evolution of a direct duty of care principle in the UK has offered some hope for affected individuals and communities. The most clear articulation of this principle was made by the Court of Appeals in Chandler v Cape plc. This approach was affirmed in the Vedanta case. A noteworthy case against a German company, KiK, could prove significant because the alleged negligence relates to the activity of an independent supplier and not a subsidiary. The direct duty of care principle definitely offers hope for victims in holding parent companies accountable. However, the usefulness of this principle should not be over-estimated. Two such initiatives are worth analysing: the European Union’s Non-financial Reporting Directive of 2014 and the UK’s Modern Slavery Act of 2015. However the effectiveness of non-financial disclosure and reporting laws in changing corporate behaviour is also suspect. The 2017, France adopted a landmark Duty of Vigilance Law to impose a duty of vigilance on companies incorporated or registered in France. The efficacy of the French law in changing corporate behaviour is yet to be seen. However, this cannot be regarded as the ‘end game’ in terms of mandatory human rights due diligence legislation. The current process to negotiate a legally binding international instrument – which began in 2014 – is the third attempt at the UN level to impose binding human rights obligations on (transnational) corporations. On the other hand, even if the best-case scenario materializes and a treaty is adopted, its effectiveness would depend on the political will shown by the ratifying states, as most of the treaty implementation would take place at the national level. In other words, multiple regulatory tools offering both incentives and disincentives would be needed to overcome corporate impunity. With a few exceptions, Asia has been predominately a continent receiving investment from Western companies. However, in recent years many Asian companies have begun to invest all over the world. This raises concerns about regulation of both inward and outward business-related human rights impacts. Certain countries in Asia have already started taking regulatory measures to promote business respect for human rights, though some continue to frame the discourse in terms of CSR. The progress on implementing the UNGPs has been very slow in Asia, with not a single country has yet adopted a stand-alone National Action Plan (NAP) more than seven years after the unanimous endorsement of the UNGPs by the Human Rights Council in June 2011. About 60 per cent of the world’s population lives in Asia, many of whom live in poverty with a low level of awareness about their rights or mechanisms available to seek access to justice. Protecting the rights of such a large population becomes more challenging in view of the facts that many Asian countries are tempted to achieve fast economic growth but suffer from a range of governance gaps (e.g., corruption, weak rule of law, lack of independent courts and/or media, and limited civic space). Unlike Europe, Africa and Australia, there is no Asia-wide BHR network of civil society engaging both states and businesses to strengthen corporate accountability. Finally, unlike other world regions, Asia has no regional human rights instrument or mechanism which can be used to deal with some of the BHR challenges. Based on regulatory experiences in Europe and at the UN level, the governments in Asia could draw a number of lessons. First, as the BHR discourse is here to stay, the approach of ‘wait and watch’ alone might not work. Nor should Asian countries – many of which aspire to achieve fast economic development – see human rights as an unnecessary obstacle to development. Rather, human rights should be used to achieve an inclusive, equitable and sustainable growth for all members of society. Second, as no single regulatory initiative could be effective, states should use the full range of legal and policy measures – in a cumulative but cohesive manner – to provide both incentives and disincentives to promote business respect for human rights. If violating human rights is made a costly business for all companies operating everywhere, rational corporate actors are likely to start taking their human rights responsibilities more seriously. Third, states should revise company laws to change the current corporate culture which focuses exclusively or predominantly on profit maximisation. Respecting human rights should be regarded as a non-negotiable pre-condition of doing business. Humanizing profit-making is paramount. Fourth, as voluntary measures in the form of carrots are more effective when they operate in tandem with binding regulations as sticks, the binding rules at both national and international levels are indispensable. Binding rules, if agreed collectively, could also help in creating a level playing field and curtailing a race to the bottom. However, when it comes to the monitoring and implementation of rules, states could use modern technology, innovative regulatory tools and market forces. Fifth, collective actions on the part of states would be vital in overcoming barriers to access to effective remedy, especially in transnational cases. A legally binding international instrument could be particularly useful in encouraging mutual assistance and international cooperation. Sixth, national human rights institutions, civil society organisations and human rights defenders have a key role in pushing states in discharging their human rights obligations as well as filling in gaps in state-based regulation. Considering Asia’s diversity and vastness, these actors should develop sub-regional networks to facilitate sharing of information, peer learning and collective action.