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International arbitration moves closer to becoming a forum for business and human rights (“BHR”) disputes with the publication of draft BHR arbitral rules. Whilst some technical considerations remain, BHR arbitration offers many exciting advantages to current dispute resolution mechanisms and would be a welcome option for many.
Under the UN Guiding Principles on Business and Human Rights (“UNGPs”), victims of BHR abuse must have access to an effective remedy. However, enforcing transnational BHR obligations through current dispute resolution mechanisms has proven difficult; foreign courts may be unwilling or unable to prosecute complex cases, for example.
Hence, since 2013, an international group of lawyers (the “Working Group”) has been exploring the possibility of using international arbitration as a method for resolving BHR disputes (“BHR Arbitration”).
The Working Group formed a Drafting Team to create a set of BHR-specific arbitral rules that would facilitate BHR Arbitration. Funded by the City of The Hague, the first draft of the BHR rules, which are based on the UNCITRAL Arbitration Rules, were published in June 2019 (“Hague Rules”). Once finalised, the Hague Rules will be offered to the Permanent Court of Arbitration. According to Steven Ratner, of both the Working Group and Drafting Team, the aspiration is for BHR Arbitration “to become part of the menu of options available under the UNGPs”. Compared to other types of arbitration, particularly investor-state dispute settlement and consumer arbitration, BHR Arbitration would be open to the public and amicus pleadings could be allowed.
BHR Arbitration offers many potential advantages as a forum for BHR disputes, providing:
BHR Arbitration has the potential to extend to any dispute that parties have agreed to resolve under the Hague Rules. Therefore, parties could include businesses, individuals, labour unions, communities, States, etc. Moreover, BHR Arbitration clauses could be inserted into supply chain contracts, meaning entire supply chains could be covered by a BHR Arbitration arrangement. This could allow the originating business to arbitrate against any BHR-breaching supplier in that chain. A benefit of this is exposing a violating supplier to relatively fast enforcement, while not increasing the originating business’ liability.
Critics allege that since parties can “opt out” of provisions of the Hague Rules or not consent to arbitrate at all, BHR Arbitration will be ineffective. However, arbitration under the Bangladesh Accord (“the Accord”) has shown promising signs. The Accord is an agreement, created in the immediate aftermath of the 2013 Rana Plaza factory collapse, between global brands, retailers and trade unions operating in Bangladesh which established that disputes against brands could be brought via arbitration. Arbitration brought under the Accord to date shows that some corporations and claimants are willing to employ BHR Arbitration. Public pressure from consumers, clients or stakeholders might further encourage consent.
Others have noted that the disparity of resources between parties may be a recurring issue and that whilst parties are never truly equal in a dispute, this imbalance may be exaggerated in BHR Arbitration. However, the Hague Rules aim to address this issue by allowing Tribunals wide freedoms to help mitigate this imbalance and permit them to consider imbalances in power and access to evidence when admitting submissions, amongst other powers.
While the mechanics require further clarification, BHR Arbitration has the potential to be an important alternative BHR dispute forum. Such a possibility will become more important as corporations continue to grow in size and impact. As stated by Diane Desierto, of the Drafting Team, “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”.
The next step would be to see corporations including BHR Arbitration provisions in their contracts. With wide institutional uptake, we may soon see law firms advising clients, and NGOs explaining to stakeholders, that BHR Arbitration is a suitable alternative when national courts are not available. As Ratner adds, “as with all issues of human rights, you have to look to the long term, and we are at the beginning of this new and unconventional field”.
Watch this space.
Suleyman Wellings-Longmore would like to thank Steven Ratner for giving his time to be interviewed for this article.
11 September 2019
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