MASTER THESIS
A REAPPRAISAL OF THE HAGUE RULES ON BUSINESS AND
HUMAN RIGHTS ARBITRATION (2019)
2019-2020
European Private Law (LLM)
María Liszka Barragán
TABLE OF CONTENTS
I. INTRODUCTION ………..3
II. BUSINESS AND HUMAN RIGHTS ………4
A) The Role of corporations as non-state actors with regards to society………..4
B) Two main international efforts within a Business and Human Rights context ……….8
i. UN Guiding Principles on Business and Human Rights (UNGP’S): John Ruggie’s Three Pillar Framework: ‘Duty, Respect and Remedy’ ……….8
ii. OECD Guidelines for Multinational Enterprises (OECD Guidelines) ………13
III. THE HAGUE RULES ON BUSINESS AND HUMAN RIGHTS ARBITRATION (2019): A step forward? ………16
A) Purpose and Overview ………..16
B) Salient Features ……….17
C) Critical approach ………...23
IV. FROM AD HOC TO INSTITUTIONAL BASIS. ‘A CALL’ FOR A SINGLE COURT ON BUSINESS AND HUMAN RIGHTS ARBITRATION …….25
A) Ad hoc vs. Institutional Arbitration ………...26
B) The establishment of a single institution within the Hague Rules legal framework ……….28
V. CONCLUDING REMARKS ………34
Abstract
This thesis explores the potential implications of the very recent Hague Rules on Business and Human Rights Arbitration from 2019, aimed at providing a state based non-judicial mechanism to be applied within the realm of business and human rights. Accordingly, in order to provide victims with an effective access to remedy, amendments were modelled on previous Arbitration Rules of the United Nations Commissions on International Trade Law (UNCITRAL Rules), in accordance with very nature of human rights and particularities thereof. Moreover, various scholars supported the establishment of a single institution to be settled under the Hague Rules’ legal framework, on the belief that, this will further ensure human rights victims’ access to effective remedies. Therefore, this paper aims to assert to what extent the establishment of a court would be required in order to accomplish this objective. The paper will be conducted on the basis of an evaluative method, by first analysing previous international efforts, namely, John Ruggie’s UN Guiding Principles on business and human rights and subsequent Three Pillar Framework; ‘Protect, Respect, Remedy’ and OECD Guidelines for Multinational Enterprises. We will then contemplate the potential advantages and concerns to be found under the Hague Rules’ legal framework and within the proposal on the establishment of a single court for business and human rights arbitration. Hence, putting forward the potential implications of the creation of such institution in ensuring an effective access to remedy for human rights victims.
Key words: The Hague Rules on Business and Human Rights Arbitration – UN Guiding Principles on Business and Human Rights – OECD Guidelines for Multinational Enterprises – Arbitration – Corporate Social Responsibility – Business and Human Rights- access to effective remedy
I. INTRODUCTION
In the wake of cross-border trade’s steady growth, efforts both at national and international level in relation to transnational corporations’ social impact have been deemed essential in the past few years. Most precisely, it is certainly recognized that a vast number of human right abuses occur within the realm of a corporation’s business activities. Several international instruments were therefore enshrined in order to reach a ‘new’ reality where corporation’s role playing towards society goes beyond the sole respect of human rights. International soft law instruments were therefore aimed at providing corporations with principles and standards to be embedded within their corporate policies. However, it may be argued that, in practice, they have failed to accurately provide human rights victims with effective access to remedy due to their soft law nature. In this regard, The Hague Rules on Business and Human Rights Arbitration (2019), is to be considered the most recent development with a view to provide human rights victims with an accessible remedy via an effective alternative to court litigation. Arbitration is a private dispute resolution method by which a dispute between two or more parties as to their mutual rights and liabilities is referred to and determined by an arbitral tribunal with binding effect. Arbitration offers several salient features such as a broad flexibility and party autonomy, which results in the attractiveness to use arbitration over international judicial settlement. The use of arbitral process within previous challenges such as war and disarmament or environmental protection proves the potential adaptability of arbitration to business-related human rights context. Accordingly, international arbitration may provide direct access, in a neutral forum to hold companies accountable where national jurisdictions are unavailable or difficult to access.1
Most particularly, the main focus of the paper is to assess to what extent the establishment of a single court for BHR would be required in order to ensure human rights victims’ access to effective remedy in business-related disputes within the legal framework of the Hague rules. In order to accomplish this aim, the paper will first offer an overview on the ‘recent’ debate on both corporate social responsibility (CSR) and businesses and human
1 Katerina Yiannibas, ‘The Adaptability of International Arbitration: Reforming the Arbitration Mechanism to Provide Effective Remedy for Business-Related Human Rights Abuses’ (2018) 36 Netherlands Quarterly of Human Rights 214.
rights notions (BHR). Therefore, it would be equally interesting to look at the already settled international framework, namely John Ruggie’s UN Guiding Principles on Business and Human Rights (UNGP’s) Three Pillar Framework: ‘Protect, Respect and Remedy’ together with the OECD Guidelines for Multinational Enterprises (OECD Guidelines).
The second part of this paper will then focus on The Hague Rules which, in principle, reveal a promising and flexible tool to be used in business-related human rights disputes. Accordingly, although there is room for a comprehensive and individual assessment of each Article, the objective, by contrast, is to focus on the main salient features aimed at addressing the potential inequality of arms between the parties together with further tools such as transparency intended for the establishment of an effective access to remedy. Finally, the paper will look into the potential shift on the rules’ ‘modus operandi’ from an ad hoc to an institutional basis. It is believed that ad hoc arbitration better suits commercial arbitration since it allows for wider flexibility. Nonetheless, and taking into account several scholars’ proposal on the creation of a single institution within BHR context, the paper will argue that because of the very nature and complexity of human rights, an institutional approach would better ensure human rights victims’ access to an effective remedy. All in all, the paper expects to make a contribution to previous scholars’ proposal on the establishment of a single court for business and human rights arbitration by questioning to what extent should such institution be settled in order to provide human rights victims with an accessible and effective remedy. The paper will therefore conduct this research through an evaluative method by analysing both the already settled international framework and the recent Hague Rules on business and human rights arbitration (2019).
II. BUSINESS AND HUMAN RIGHTS
A) The Role of corporations as non-state actors with regards to society
In the past recent years, the debate surrounding businesses’ “accountability” in relation to their impact on society opened the door for the establishment of an international framework to that effect. This framework has evolved around the notion of Corporate Social Responsibility (CSR) ,which may, in principle, allow for different interpretations.
For instance, it has been described by scholars as a multi-layered concept formed by four interrelated aspects; economic, legal, ethical and philanthropic responsibilities. 2
According to the EU Commission, which has defined it narrowly, corporate social responsibility is the “responsibility of enterprises for their impact on society”.3 However,
there is a major debate behind to be first addressed, namely, whether to grant (or not) corporations legal personality. López Latorre, contributes to this debate on corporation’s direct/indirect obligations under international law by providing a distinct understanding of current international law on the basis of a conceptual evolution on international legal subjectivity, where businesses and other non-state actors have the capacity to bear international rights and obligations.4 Thus, differing from the traditional interpretation where States and International Organizations are to be considered the main subjects and duty-holders under international law. Current legal doctrine draws a distinction between full and partial legal personality. Full legal personality refers to States implying that they are to be considered the sole or at least full duty-holders and subjects of international law, as opposed to partial legal personality, under which other subjects of international law, namely, international organizations, will be conferred rights and duties dependent on the founding State’s organization to that effect.5
Accordingly, non-state actors would only be subject to international law indirectly given that corporations are limited and wholly dependent on the State’s further actions of implementation and enforcement.6 Hence, indirect obligations would imply corporations
being solely aware of the further implementation of the norms at a national level as opposed to direct obligations, whereby businesses will be granted the condition of
2 Cristina A Cedillo Torres and others, ‘Four Case Studies on Corporate Social Responsibility: Do Conflict Affect a Company’s Corporate Social Responsibility Policy’ (2012) 8 Utrecht L. Rev. 51.
3 COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS A renewed EU strategy 2011-14 for Corporate Social Responsibility 6.
4 Andrés Felipe López Latorre, ‘In Defence of Direct Obligations for Businesses under International Human Rights Law’ (2020) 5 Business and Human Rights Journal 56. (p.82)
5 ibid. (p.57) 6 ibid.
subjects to international law alongside States.7 As a matter of fact, victims commonly
look forward to the States’ holding corporations accountable for the harm caused. Nevertheless, there are clear gaps in the current human rights accountability system.8
The truth is, as pointed out by scholars, that businesses are no longer engines or instruments of commerce, but are rather to be observed as political institutions.9 Hence,
transnational corporations currently have powerful potential capabilities to displace the ability of governments to exert influence over their actions.10 Additionally, one may argue
that in current globalising economies, the traditional allocation of human rights obligations within and between states – which lay mutually exclusive claims to sovereign territorial rights – is losing ground since State sovereignty is not what it used to be.11
Current global reality has shown that businesses do increasingly have influence over society since they also contribute in relevant ways to international trade, by means of, for instance, their commercial transactions, thus having an impact on human rights protection.12 The Rana Plaza Collapse in Bangladesh (2013) serves as an example of
human rights abuses within corporation’s supply chains: where a vast number of employees died or at least got injured due to the working conditions not being safe. One may argue that the legal force of an obligation does not derive from the existence of a sanction, but from the understanding that to comply with those obligations becomes necessary to act in favour of the common good of the international community.13
Furthermore, overtime we see companies being held “accountable” for non-compliance
7 Carlos M Vazquez, ‘Direct vs. Indirect Obligations of Corporations under International Law’ (2004) 43 Colum. J. Transnat’l L. 927. 933
8 Youseph Farah, ‘Unpacking the Potential for Unilaterally Binding Arbitration: Improving Access to an Effective Remedy, and Business-Related Human Rights Violations’ [2020] Available at SSRN 3526741. 9 Robert C Blitt, ‘Beyond Ruggie’s Guiding Principles on Business and Human Rights: Charting an Embracive Approach to Corporate Human Rights Compliance’ (2012) 48 Tex. Int’l LJ 33. (p.37)
10 ibid.
11 Daniel Augenstein and David Kinley, ‘When Human Rights “Responsibilities” Become “Duties”: The Extra-Territorial Obligations of States That Bind Corporations’ [2013] Human rights obligations of business: Beyond the corporate responsibility to respect. (p.21)
12 Latorre (n 4). (p.59) 13 ibid. (pg.74)
with international standards set out in soft law international instruments, followed by media and social pressure. For instance, there are several case-studies aiming to provide readers with insights on CSR policy integration within corporation’s corporate decision making before and after their participation in different conflicts, in order to ascertain whether reputation damage is a main motivation behind the adoption of CSR policies of multinationals.14
From the research conducted under the case-studies, it became clear that several CSR policies were already within the corporation’s activities in the form of, for instance, sustainability reports or codes of conduct. Nonetheless, first reactions from corporations to conflicts varied, from a more defensive approach, like for instance, Coca-Cola, to a more proactive one followed by Canon. However, in practice, the implementation of further CSR policies followed by an update to the already established ones certainly occurred after the conflicts arose. Therefore, on one hand, one may question whether the international community should further strengthen business accountability in order to prevent, rather than wait for harm to be repaired. Or, perhaps, there is a main upside on corporations facing public scrutiny, which is that they may have become role models for their industry.15
For the purpose of this paper it also should be noted that, although Corporate Social Responsibility and Business and Human Rights context may appear to be the same, they are conceptually different. While CSR remains focused on voluntarism and aspirational notions of how companies should engage with stakeholders, BHR main focus is geared towards the urgent need for victims to hold corporations accountable for the harm caused.16 Nevertheless, not only do both concepts focus on companies engaging in
responsible and socially beneficial activities, but it may also be argued that BHR is in part a response to the perceived failure of CSR.17
14 Torres and others (n 2). [Corporations studied: Coca-Cola, Walmart, Apple and Canon] (p.53) 15 ibid. (p.73)
16 Anita Ramasastry, ‘Corporate Social Responsibility versus Business and Human Rights: Bridging the Gap between Responsibility and Accountability’ (2015) 14 Journal of Human Rights. (p.252)
Human rights are defined as inalienable fundamental rights to which a person is inherently entitled simply because she or he is a human being; thus, they cover political, civil, socio-economic and cultural rights as defined by the UN Universal Declaration of Human Rights, the International Bill of Human Rights and further treaties.18 While national
human rights standards may differ between States, this paper will be conducted within the human rights concept enshrined in the abovementioned international documents and will most particularly focus on the right to an effective remedy. Article 8 of the Universal Declaration of Human Rights stipulates as follows; “everyone has the right to an effective remedy by the competent national tribunals for acts violating the fundamental rights granted to him by the constitution or by law.”19
B) Two main international efforts within a Business and Human Rights context Having settled the state of art, the paper further aims to provide an overview on already enshrined international soft law instruments together with the non-judicial grievance mechanisms to be found therein in relation to business-related human rights disputes. Accordingly, this paper will focus on two of the main efforts driven by both the United Nations (UN) and the Organization for Economic Cooperation and Development (OECD), thus offering a brief analysis on whether they accurately provide victims with an effective access to remedy. Especially, given that the above-mentioned principles and guidelines do follow a non-binding approach due to their soft law nature.
i. UN Nations’ Guiding principles on Business and Human Rights: John Ruggie’s Three Pillar Framework; ‘Protect, Respect and Remedy’
The paper will focus on John Ruggie’s – UN Special Representative of the Secretary General (SRSG) – report from 2011, namely “Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework.20
18 Florian Wettstein and others, ‘International Business and Human Rights: A Research Agenda’ (2019) 54 Journal of World Business 54.
19 Universal Declaration of Human Rights (adopted 10 December 1948 UNGA Res 217 A(III) (UDHR) 20 John Ruggie, ‘Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises: Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’Framework’ (2011) 29 Netherlands Quarterly of Human Rights 224.
This three-pillar framework draws a distinction between the roles of both governments and businesses. While it firstly imposes a duty to protect human rights on States, corporation’s responsibility is limited to the respect of those human rights, alongside with a third Pillar (‘remedy’) which regards to the establishment of appropriate and effective remedies.21 It stems from the first that, States, in order to achieve this protection, must
take the appropriate steps to prevent, investigate and punish those businesses practices that would potentially have a negative impact on human rights, through different means such as; effective policies, legislation, regulation or adjudication.22 Furthermore, although
States are not in principle refrained from regulating businesses’ extraterritorial activities – as long as there is a jurisdictional basis – the principles do not impose such an obligation on them.23 Therefore, as pointed out by the SRSG, the extraterritorial dimension of the
state’s duty to protect human rights in relation to business entities remains unsettled in international law.24
Moreover, further shortcomings may be found within these principles, namely with regards to the absence of reference to business direct obligations. For instance, business direct implications are limited to the respect of human rights, thus meaning to avoid their infringement and to address the potential impacts that businesses might be involved in.25
As a matter of fact, Ruggie emphasizes that both the framework and guiding principles are not intended to create new legal obligations for business enterprises at an international level, but rather they are to be understood as a reflection of ‘societal expectations’.26
Interestingly, businesses responsibility towards the respect of human rights is also limited to the internationally recognized human rights, understood at a “minimum”, that is to say;
21 ibid.
22 John Ruggie and Palais Des Nations, ‘Guiding Principles on Business and Human Rights: Implementing the UN “Protect, Respect and Remedy” Framework’ [2011] Report of the Special Representative of the Secretary General on the issue of human rights and transnational corporations and other business enterprises. (p.3)
23 ibid. (p.4)
24 John Ruggie, ‘Business and Human Rights: Towards Operationalizing the ‘Protect, Respect and Remedy’Framework’ [2009] Human Rights Council. (para.15)
25 Ruggie and Des Nations (n 22). Note 11 (p.13) 26 Ruggie (n 20). (p.199)
those expressed in the International Bill of Human Rights (IBHR) along with those principles set out in the International Labour Organization’s Declaration on Fundamental Principles and Rights at work.27 Therefore, stepping aside a larger spectrum of recognized
rights such as those established under the Convention on the Elimination of All Forms of Discrimination against women (CEDAW). 28 Human Rights commentators have
designated businesses’ duty to respect as a merely passive responsibility.29 Criticism
which Ruggie rejected by clarifying that the way a company can discharge corporate responsibility to respect is through ‘due diligence’.30 In the context of the Guiding
Principles, ‘human rights due diligence comprises an ongoing management process that a reasonable and prudent enterprise needs to undertake, in the light of its circumstances (including sector, operating context, size and similar factors) to meet its responsibility to respect human rights’.31 Hence, it may be argued that, ‘due diligence’ may turn out to be
used as a defensive claim for businesses involved in human rights disputes in order to waive responsibility, by stating that their operations were conducted through due diligence.32 Moreover, the extent to which businesses are to meet their responsibility will
be determined according to several factors – i.e. size, operational context, ownership or structure.33 It would then appear that, in principle, a less rigorous compliance standard
will be allocated to smaller businesses as opposed to bigger corporations where further additional national human rights obligations may be imposed.34 In the same vein, the
27 Ruggie and Des Nations (n 22). note 12 28 Augenstein and Kinley (n 11). (p.45)
29 Astrid Sanders, ‘The Impact of the’Ruggie Framework’and the United Nations Guiding Principles on Business and Human Rights on Transnational Human Rights Litigation’. (p.10)
30 ibid. (p.11)
31 An Interpretive Guide, ‘THE CORPORATE RESPONSIBILITY TO RESPECT HUMAN RIGHTS’. (2012), Office of the High Commissioner on Human Rights (OHCHR) (P.6)
32 ibid. (p.14)
33 Ruggie and Des Nations (n 22). Note 14, (p.15) 34 Augenstein and Kinley (n 11). (p.48)
Guiding Principles do recommend corporations respect human rights “to the greatest extent possible in the circumstances”.35
Hence, one may argue, that far from such principles imposing direct obligations, businesses might further waive minimum obligations by “proving” their “efforts” to respect international human rights. Divided opinions came out of this Framework. On one hand, they were highly welcomed by organizations such as the OECD, the European Commission or the UN Global Compact.36 Conversely, many leading human rights
non-governmental organizations (NGO’s) together with, for instance, the International Federation for Human Rights (FIDH), publicly criticized these principles for being far from the endorsement of businesses accountability in human-rights related disputes.37
Most importantly, it could be argued that the present Guiding Principles do not provide an effective access to remedy given that the remedies to be provided for potential human right victims ultimately rely on the State’s duty to promote both State or non-State – based process (i.e judicial and non-judicial).38 Most particularly, there are no specific solutions
provided to effective access to remedy beyond abstractive principles under Pillar Three which has even been qualified as the ‘forgotten pillar’.39 Hence, an effective access to
remedy might be undermined due to potential vested interests and the inability or sometimes unwillingness of States to regulate corporations, most particularly, in those States where the judiciary tends to be corrupt.
Interestingly, an extensive research study on Ruggie’s Three Pillar (‘Remedy’) on effective access to remedy was conducted by several scholars through the analysis of three main case-studies on BHR. The main outcome revealed that, although corporations themselves may abide to their responsibilities under UNGP’s beforehand, in practice, for victims to seek an effective access to remedy remained a daunting task. For instance, in
Chevron vs. Ecuador, Chevron alleged its human rights corporate policy to be consistent
35 Ruggie and Des Nations (n 22). (p.21) 36 Augenstein and Kinley (n 11). (p.51) 37 ibid.
38 Ruggie and Des Nations (n 22). Note 24, (p.27) 39 Farah (n 8). (p. 2)
with UN Framework, although in practice, stated its commitment to a responsible performance towards people’s environment by prioritising the health and safety of the company’s workforce and company assets without mentioning anything about third parties being victims of its corporate practices.40 Similarly, this research revealed Shell’s
CSR policies to be inconsistent with UNGP’S Framework in Shell v. Nigeria Case.41 All
three cases heavily relied on the use of the judicial, thus alternative dispute resolution mechanisms where mostly unconsidered.42 Furthermore, the lack of transparency on the
solutions offered by the companies involved, again, revealed the need for the establishment of an international instrument to further provide human rights victims with an accessible remedy while at the same time being appealing to businesses.
Nevertheless, it should be noted that, in fact, the UNGPs may be considered as a main starting point at international level which allowed the recognition of corporation’s potential impact with regards to human rights violations. As a matter of fact, a study conducted on the potential impact of UNGP’s in transnational litigation opened the door for drawing an analogy between corporation’s responsibility to respect under the 2nd pillar and the tort of negligence in domestic jurisdictions, most particularly within common law systems (i.e US and UK).43 Meaning that, both guiding principles and framework would
conceivably be able to add legitimacy or provide support for plaintiffs bringing negligence claims in state or domestic laws against transnational corporations for alleged corporate related HR disputes.44 For instance, the study found references to Ruggie’s
Framework and Guiding Principles in judicial decisions both in the US and UK’s transnational human rights litigation against transnational corporations such as in Doe v.
Nestle and Doe VIII v. Exxon Mobil.
40 Tineke Lambooy, Mary A Varner and Aikaterini Argyrou, ‘The Corporate Responsibility to Remedy (3rd Pillar Ruggie Framework)-Analysis of the Corporate Responses in Three Major Oil Spill Cases: Shell-Nigeria, BP–US (the Gulf), Chevron–Ecuador’ [2011] University of Oslo Faculty of Law Research Paper. (p.12)
41 ibid. (p.24) 42 ibid. (p.51)
43 Sanders (n 29). (p.26) 44 ibid.
Therefore, it could be then stated that soft law instruments may lead to a positive incentive for businesses to abide by their obligations towards human rights protection. However, it could be argued that UNGPs most prominent weakness would be its non-binding nature whereby recommendations are far from ‘tackling’ a more complex reality and to provide an effective access to remedy to human rights victims. Perhaps, a possible solution might be UNGP’s shift requirement from where the State has exclusivity over human rights matters, thus including access to effective remedy, to where the State occupies a central stage on human rights matters, with corporations having direct responsibilities, independent of national law.45
ii. The OECD Guidelines for Multinational Enterprises (2011)
From the 1970’s onwards, the demand from the international community for a ‘new international economic order’ to protect the interest of developing countries was on the rise, based on the concern of the potential risk to developing countries and their sovereignty caused by increasing economic and political power of corporations.46 To that
extent, the Organization for Economic Cooperation and Development’s Guidelines (OECD Guidelines) is considered as the sole corporate responsibility instrument formally adopted by national governments.47 The Guidelines aim to promote positive contributions
by enterprises to economic, environmental and social progress worldwide.48 Hence, the
relevance of the Guidelines together with the continuously growing CSR initiatives can only be understood in the context of the minimal legal obligation requiring business entities to respect human rights, social norms and environmental standards at that point in time.49 In the same line of UNGP’s, the OECD Guidelines are ‘voluntary’,‘not-binding’
and ‘non-legally enforceable’ recommendations which provide principles and standards
45 Farah (n 8). (p.1)
46 Leyla Davarnejad, ‘In the Shadow of Soft Law: The Handling of Corporate Social Responsibility Disputes under the OECD Guidelines for Multinational Enterprises’ [2011] J. Disp. Resol. 351. (p.354) 47 Jernej Letnar Cernic, ‘Corporate Responsibility for Human Rights: A Critical Analysis of the OECD Guidelines for Multinational Enterprises’ (2008) 4 Hanse L. Rev. 71. (c)
48 ibid.
for responsible business conduct consistent with applicable laws and internationally recognised standards.50
However, alternatively to the UNGPs, they do have a biding connotation behind, since signatory governments are obliged to establish national authorities known as National Contact Points (NCP’s), when adhering to the Guidelines. It is therefore believed that, governments would play a prominent role by providing effective domestic policy frameworks, thus including; appropriate regulation, impartial system and/or efficient and honest public administration, among others.51
NCP’s are government offices responsible for encouraging adherence to the Guidelines at the national level.52 Furthermore, they are established by governments in order to
promote the Guidelines and act as a forum discussion of all matters relating to the Guidelines.53 Moreover, the Guidelines are mostly geared towards the use of mediation.
Mediation usually weighs the interest of parties over the evaluation of law, which could lead to a diminishing of the ‘quality of justice’ together with the quality of fairness.54
Besides, due to the high leverage large corporations may potentially have upon States, there is a high risk of mediation becoming biased. Accordingly, a shift of the mediator’s role may be necessary it assumes an active investigatory role which could lead to recommendation based on the full enjoyment of international human rights free from considerations of efficiencies.55
Nevertheless, these, in principle, promising ‘national institutions’ have demonstrated several downsides in practice, mainly due to the existing divergences between the different national implementation procedures. Most particularly, a uniform NCP’s structure is not provided under the Guidelines meaning that States would have discretion
50 Organization for Economic Co-operation and Development (OECD), OECD Guidelines for Multinational Enterprises: 2011 Edition (OECD Paris 2011). (para.13)
51 ibid. (para.11)
52 OECD Guidelines, supra note 1, at 33-35.
53 Co-operation and Development (OECD) (n 50). Concepts and Principles, (para.11) 54 Farah (n 8). (p.13)
with regards to the organization and procedural rules to be followed. Such discretion opens the door to different interpretations and approaches when implementing the Guidelines (‘interpretative choice’).56 Nevertheless, interpretative choices may be
considered positive in terms of allowing for the adaptability of multiple procedures and parties to the very specific fields. Several scholars further reflected NCP’S implementation divergences by means of an extensive socio-legal study.57
Consequently, it could be then stated, that both UNGP’s and Ruggie’s Three Pillar Framework and OECD Guidelines are two international efforts willing to provide human rights victim’s with access to effective remedies. However, the UNGP’s have not yet resolved whether corporations are bearers of obligations under international law. 58
Neither did the OECDE Guidelines overcome this matter since it is not clear whether NCP’s role is an adjudicative one as to evaluate whether the conduct of a corporation is in breach of the Guidelines or if by contrast, their role is limited to facilitate a solution.59
Overtime, we have seen international soft law principles and standards opening their way to their customary international use in practice. Nevertheless, it becomes clear that due to the very nature of human rights, much is to be achieved either by the establishment of an international legally binding instrument or the creation of an international institution. Accordingly, this paper will subsequently focus in the most recent development to that effect and within a field characterized by both its flexibility and enforceability. That is to say, Arbitration.
56 Adrian Vermule, Interpretative choice ,75 N.Y.U.L Rev. 74 (2000) cited by DAVARNEJAD, 57 DAVARNEJAD, (p. 366-385)
58 Andrew Clapham, Human Rights Obligations of Non-State Actors (OUP Oxford 2006). Chapters 2 and 3
III. THE HAGUE RULES ON BUSINESS AND HUMAN RIGHTS ARBITRATION (2019): A step forward?
The Hague Rules on business and Human Rights Arbitration (2019)60 is to be considered
the most recent international effort conducted by the ‘Working Group’, formed by several scholars and experts in the field of business and Human Rights, together with the ‘Draft Group’ of experts headed by Judge Bruno Simma. The Rules were primarily based on the previous Arbitration Rules of United Nations Commissions on International Trade Law (UNCITRAL Rules) and further adapted to the very nature of human rights, thus including several modifications to that extent.61 Furthermore, the Rules are also in line
with Ruggie’s UNGPs Three Pillar Framework.62
Hence, this section aims to present first insights on this newly non-judicial state dispute mechanism meant to be used in the field of business and human rights-related disputes and whereby arbitration may play a better role as opposed to current non-judicial grievance mechanisms. Therefore, a brief overview on these Rules will be provided while at the same time taking into consideration comments, recommendations and opinions from several scholars, experts in the field and other stakeholders from the Sounding Board consultations.
A) Purpose and Scope
The very first attempt of this new international instrument is to offer a non-state judicial mechanism, which aims to provide an efficient and effective alternative to court litigation, since both arbitration and court litigation share a common objective, which is to contribute to the realization of Human Rights.63 From the wording of the report, it is
60 The Hague Rules on Business and Human Rights Arbitration, December (2019), See: https://www.cilc.nl/cms/wp-content/uploads/2019/12/The-Hague-Rules-on-Business-and-Human-Rights-Arbitration_CILC-digital-version.pdf
61See The Hague Rules, Introductory note, (p.3) 62 Ibid.
63 The Hague Rules on Business and Human Rights Arbitration (Report) Launch symposium of The Hague Rules on Business and Human Rights Arbitration 12 December 2019, Peace Palace, The Hague, The Netherland(p.4)See: https://www.cilc.nl/cms/wp-content/uploads/2020/02/The-Hague-Rules-on-Business-and-Human-Rights-Arbitration_Launch-Report-.pdf
suggested that although the Rules are to be used internationally, they are especially geared towards those countries where the judiciary tends to be corrupt, thus being the access to effective remedy potentially undermined. For instance, although some countries such as the US already established remarkable efforts in order to allow federal courts to take lawsuits from non-US right-holder victims (i.e The Alien Tort Statute, 1789), the ruling of the very famous Kiobel vs. Royal Dutch Petroleum64 serves as an example to
further demand additional efforts at an international level, given that access to an effective remedy was not available for victims due to the non-extraterritorial effect. Additionally, considering that many brands became signatories to the subsequent Bangladesh Accord after the Rana Plaza Collapse (2013), the Draft Team believed this constitutes an example gearing towards the use of arbitration in business and human rights-related disputes.65
Furthermore, due to the very nature of Human Rights and the particularities thereof, the Rules attempt to offer a level playing field between the parties by diminishing the potential inequality of arms.66 As a result, several tools are incorporated to that effect. It
could be then argued that the Rules are in line with Ruggie’s Framework where BHR arbitration serves the goal of providing a non-state based non- judicial remedy for victims
‘ex post’ under Pillar III (i.e remedy) while also serving as an incentive for businesses to
abide to their obligations under Pillar II (i.e respect) ‘ex ante’.67
B) Overview
Although the Rules allow for a comprehensive analysis, an individual assessment of each Article would go beyond the scope of this paper. Therefore, it will mostly focus on the main features aimed at providing the necessary tools for the establishment of an effective access to remedy for human rights victims. Although international arbitration may
64 See: ‘10-1491 Kiobel v. Royal Dutch Petroleum Co. (04/17/2013)’ 35.
65 Report, (word of welcome) Host Mr. Hugo H. Siblesz, Secretary General Permanent Court of Arbitration 66 The Hague Rules, ‘A closer look at the salient Business and Human Rights Issues through the lens of the UN Guiding Principles on Business and Human Rights, presented by Prof. Steven Ratner and Prof. Ursula Kriebaum, Drafting Team members, at the Launch Symposium of the Rules at the Peace Palace on 12 December 2019’ See: https://www.cilc.nl/cms/wp-content/uploads/2020/06/Salient-BHR-issues-in-The-Hague-Rules-on-BHR-Arbitration-S.Ratner-U.Kriebaum.pdf
provide advantages for victims seeking access to effective remedies, potential concerns may arise regarding the potential lack of appropriate measures to ensure and to facilitate access to remedy, while also promoting its legitimacy. Accordingly, in order to lower the potential barriers that human rights victims commonly face when seeking access to remedy, several ‘unique’ features are to be found under the Rules.68
i. Inequality of Arms
In order to provide an effective access to remedy, the very first subject matter to be assessed is, the potential inequality of arms between the parties at the dispute. In this regard, the Rules include several modifications conversely to the UNCITRAL rules, thus looking forward to address both the potential economic and/or power imbalances that victims commonly face vis-à-vis corporations.69 Furthermore, it is stipulated that ‘the
arbitral tribunal shall endeavour without compromising its independence and impartiality, to make sure that the unpresented party can have a chance to present its case in an effective and fair manner’.70 Hence, it is for the arbitral tribunal to some extent oversee
the potential imbalance between the parties and thus to strike a balance among several elements within the proceeding such as in relation to the taking of evidence, particularly fairness, efficiency and cultural appropriateness.71
Moreover, the Rules do include a Special Code of Conduct for arbitrators based on best practices and including, but also exceeding, the International Bar Association Guidelines on Party in International Arbitration (IBA Guidelines) in order to further ensure arbitrators independence and impartiality within the arbitration proceedings.72 It is
68 Keon-Hyung Ahn and Hee-Cheol Moon, ‘An Introductory Study on the Draft Hague Rules on Business and Human Rights Arbitration’ (2019) 29 J. Arb. Stud. 3. (p.14)
69 For instance, Article 22(4) on the statement of claim serves as an example whereby the tribunal should take into account the potential power or economic imbalance between the parties in accessing evidence. See:https://www.cilc.nl/cms/wp-content/uploads/2020/06/Salient-BHR-issues-in-The-Hague-Rules-on-BHR-Arbitration-S.Ratner-U.Kriebaum.pdf
70 The Hague Rules (2019), Commentary on Art.5(2) (p.24) 71 The Draft Hague Rules (2019), Commentary on Art.27(2), (p.43)
72 Prof. Ratner, December 2019, ‘New requirements on Arbitrators’ See: https://www.cilc.nl/cms/wp- content/uploads/2020/06/Salient-BHR-issues-in-The-Hague-Rules-on-BHR-Arbitration-S.Ratner-U.Kriebaum.pdf
equally worth considering that, a new and detailed section on Transparency is created under the Rules. While taking into consideration Transparency Rules under UNCITRAL, this section offers a new set of default rules that lean heavily in favour of transparency during the proceedings.73 Traditional commercial arbitration is well-known for its
confidentiality, which commonly poses an incentive for corporations to enter into alternative dispute resolution mechanisms. Nonetheless, because of the very nature and complexity of human rights, it is inherent to the public interest to allow for a greater transparency, although confidentiality may also be safeguarded at some points, such as for instance, in case of protection of witnesses. As a matter of fact, some scholars were, in principle, sceptical about the use of arbitration within the realm of business and human rights. Notwithstanding, it may also be argued that transparency would be important in order to perform public function, thus enabling the public to ensure just procedures and right compatible outcomes.74 Furthermore, greater transparency enables the process to
become a learning tool that informs corporations and policy makers of how best to respect, protect and fulfil human rights.75
ii. Flexibility and party’s autonomy
The Hague Rules are at the same time characterized by their flexibility and generality to deal with multiple kinds of proceedings.76 Thus, this further emphasizes the parties’
autonomy. One clear example is to be found within the applicable law to the dispute, whereby parties may agree to the applicability of a wide range of normative sources which may not only include, national laws, but also soft law instruments related to business and human rights norms such as the OECD Guidelines or Codes of conduct.77
The majority of participants in the Sounding Board Consultations were in favour of a illustrative list which allows for the applicability of both hard law and soft law nature
73 ibid. ‘New Transparency’ (Prof. Ratner). 74 Farah (n 8). (p.10)
75 ibid.
76 Report on the Hague Rules, Introductory comments (6.1.3) (p.7)
77 The Hague Rules, Commentary on Article 46, (1) further explains that ‘the use of “law, rules of law or standards” intends to provide the parties with the broadest possible flexibility in choosing the normative sources from which the applicable law is drawn’.
instruments.78 Nevertheless, businesses representatives were mainly of the opinion that
the possibility for the parties to include soft law instruments to be applicable in the dispute, would render the Rules as non-starter.79 Positivists would reject this statement on
the basis that, although the content of soft law may vary, it will still be considered law since the norms found therein are formulated as rules and designed to guide behaviour.80
As a matter of fact, businesses have overtime expressed that they stand by those principles within their corporate policies and supply chains. Hence, despite these sources being soft law in nature, they may actually provide an incentive for businesses to ‘practice what they preach’.
Similarly to UNCITRAL rules, the Hague Rules follow the so-called “four-step approach”. Accordingly, Article 46 stipulates: “Para 1 provides for the possibility of an agreed choice of law. Para 2 contains a default rule of applicable law. Para 3 allows for an express agreement of the parties for an ex aequo et bono decision by the tribunal. Para 4 draws the arbitral tribunal’s attention to various additional binding rules that it may draw upon to resolve the dispute.”81 Thus, offering further solutions to be used in those
situations where parties fail to agree on the choice of the governing law to the dispute. Additionally, the Rules envisage an Annex for Model Clauses aimed at providing parties with already drawn up clauses to be included within their agreement. Thus, the Rules reveal adaptability to deal with multiple kind of proceedings, parties and issues at stake. In the same vein, parties may also opt-out from those provisions that they do not consider necessary for their dispute.82
78 Summary of Sounding Board Consultation Round 1- Results Elements Paper on the Hague Rules on Business and Human Rights Arbitration, June 2019. (p.6) See:https://www.cilc.nl/cms/wp-
content/uploads/2019/06/Summary-Paper-Sounding-Board-Consultation-Round-1-%E2%80%93-Results.pdf (p.6) 79 Ibid. (p.7)
80 Barnali Choudhury, ‘Balancing Soft and Hard Law for Business and Human Rights’ (2018) 67 International & Comparative Law Quarterly 961. (p.963)
81 Report on the Hague Rules (December,2019) Note, 6,4 on Applicable Law (p.11)
82 The Hague Rules, Commentary on Article 38; “it is not desirable for parties to make too many deviations from the Rules as it might upset the balance sought in various provisions (..)” however, “parties may
iii. Remedy
Within the realm of Human Rights law, a wide range of remedies -- which do not merely constitute an award of damages -- is deemed essential.83 Hence, commentary on Article
40 (2) clarifies that the illustrative list of remedies adopted under the Rules where at the same time based on the Commentary on Principle 25 of the UNGPs, which is known as the “Foundation Principle” of access to remedy under Pillar III.84 Therefore, this would
entail that the arbitral tribunal may order non-monetary relief available under the applicable law such as: ‘restitution, rehabilitation, satisfaction, specific performance and the provision of guarantees of non-repetition’.85 Furthermore, from the wording of the
commentary on Article 40 (3), the arbitral tribunal may order a broad range of sanctions, ‘monetary or otherwise’ - which could for instance affect one party’s reputation in case of non-compliance with the tribunal’s decisions.86 Both statements were likewise
welcomed throughout the Board Consultations.
Interestingly, with regards to interim relief, the Rules envisaged a new ‘figure’ known as the ‘emergency arbitrator’ and which was not previously provided under the UNCITRAL Rules. Commentary on Article 26-bis of the Draft explains that ‘business and human rights arbitration may have a particular need for urgent interim relief’.87 Consequently,
parties may request urgent interim measures before the constitution of the tribunal under Article 31.88 One could then argue, that this new figure serves as another example of the
multiple efforts taken by both the Working Group and the Draft team in order to ensure and further facilitate an effective access to remedy to human rights victims. As a matter
exercise their discretion to opt out of certain provisions that do not respond to their needs in the dispute at issue” (p.70)
83 Ahn and Moon (n 68). (p.17)
84 Draft on the Hague Rules on Business and Human Rights Arbitration (June, 2019) See Commentary on Article 40 (2) (p.57)
85Bruno Simma, Diane Desierto & Martin Rodriguez et a. (2018), op. cit, p. 16. cited by, Ahn and Moon
(n 68). (p.17)
86 Draft on the Hague Rules, See Commentary on Article 40 (3), (p.58) 87 Draft on the Hague Rules, See Commentary on Article 26-bis (p.41) 88 The Hague Rules, See Article 31 (1) (p.57)
of fact, it was overwhelmingly welcomed by respondents in the Sounding Board consultations. Most precisely, in accordance with the ‘precautionary principle’ which allows for a broad and flexible interim measures provision.89
iv. Costs
Costs constitute one of the main key barriers commonly faced by human rights victims when seeking access to an effective remedy, thus resulting in denial of justice. Accordingly, it will be equally relevant to briefly consider some of the tools provided under the Rules for the purpose of lowering those barriers. In this vein, the Rules stipulate that the tribunal may take into account the potential cost burden on each party when establishing the fees and expenses for arbitrators and at the same time decide on the deposit of costs with the same reasonableness.90 Furthermore, with regards to the
allocation of costs, they do in principle envisage the famous ‘the loser pays’, on the belief that to submit to arbitration may constitute an incentive for the economically weaker parties with strong cases at hand.91 Still, Article 53(1) allows for deviation of the tribunal
within its discretion and reasonableness due to the circumstances of the case for which it includes an illustrative list of possible circumstances to allow such departure.92
Regarding financial assistance, the majority of respondents to Board Consultations were in favour of its inclusion. From the wording of the final version, we find that within the third-party funding sphere, the Rules merely set a disclosure requirement from parties making use of financial assistance or any other form of funding.93 Since the Rules do not
necessarily overcome such financial assistance for economically weaker parties, some further suggestions were proposed during the consultations, varying from the use of pro-bono legal assistance, to a financial contribution by transnational corporations when submitting to BHR arbitration to flexible third party funding. Most particularly, the
89 See: Summary of Sounding Board Consultation Round 1 – Results Elements Paper on the Hague Rules on Business and Human Rights Arbitration June 2019 (p. 12)
90 The Hague Rules, See Articles 52 to 54 (p.85-89) 91 The Hague Rules, See Commentary on Article 53 (p.87) 92 ibid.
majority of respondents supporting pro bono arbitrators or counsels referred to the recent PCA administered arbitrations in the Bangladesh Accord cases which may confirm the potential use of pro bono legal assistance in practice.94 Moreover, although the
establishment of financial assistance goes beyond the arbitral rules, already established international mechanisms may be considered, like for instance, PCA’s Financial Assistance Fund. Given that, in principle, it is only available to signatory States, it may be further suggested that, rather than creating a new Fund, PCA member States may consider the adaptation of the already existing Fund to provide assistance to non-state parties within a BHR context.95 Because of the potential economic imbalance between
human rights victims vis-à vis corporations, the establishment of a funding formula remains one of the main subject matters to be addressed, in order to ensure that the Hague Rules accurately operate in practice. Although a combination of the abovementioned financial suggestions would be a sound starting point, the constitution of a Financial Assistance Fund similarly to PCA’s, on an institutional basis, may turn out to be the most feasible option.
v. Critical Approach
Both the Working Group and Draft Team’s attainment to enshrine the Hague Rules once again reflected the potential adaptability of International Arbitration to controversial challenges at a global scale, in this case within the context of business-related human rights disputes. In order to accomplish this, the establishment of appropriate measures and modifications, due to the particularities of human rights protection, was required. Respondents from the Sounding Board of Consultations expressed some potential concerns under the Rules which may lead to its revision, accompanied by further modifications, in order to accurately provide victims with an effective access to remedy. Nonetheless, this paper will mainly focus on what may be considered as a major concern when ensuring an accessible remedy to human rights victims and which is consent to arbitrate. For an arbitral award to be recognized and enforced under the New York Convention (1958), an agreement is required following the consent to arbitrate between
94 See Summary of Sounding Board Consultation, (p. 15) 95 Yiannibas (n 1). (p.228)
the parties.96 Moreover, not only the modalities by which parties may consent, but also,
the content of such consent is neither addressed under the Hague Rules nor under the UNCITRAL rules.97 It is further stated that consent may be established either in the form
of a contractual clause - hence before the dispute arises- or in the form of an agreement between the parties once the dispute has arisen (‘compromis’). It should however be noted that Model Clauses are provided by the Rules, which parties may use to that effect.98
Arbitration agreements are subject to privity of contract, which is a generally and universally recognized principle present in almost any contract law, meaning that contracts are only enforceable by the contracting parties.99 Moreover, when thinking
about a business to business (B2B) scenario (envisaged under the Rules) consent may pose less concern whereas in a victims to business (V2B) context, privity would be more difficult to establish.100 As a matter of fact, respondents from the Sounding Board called
into question how consent can be meaningfully obtained from individuals and communities.101 To include a contractual clause within commercial and supply chain
contracts beforehand may, in principle, result in the best option, but at the same time it would ultimately rely on businesses incentive to submit to arbitration.
Hence, the main concern would arise when it comes to the situation in which there is no previous clause in place prior to the dispute. Accordingly, several possible solutions may be considered to that effect. For instance, scholars mention the potential use of a ‘escalation clauses’ to be included by corporations within all their supply chain agreements in order to ensure that their business activities are free from human rights abuses.102 As a matter of fact, Walmart’s conflict with regards to the finding of child
96 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. From UNCITRAL website. Adopted by the United Nations Conference on International Commercial Arbitration on 10 June 1958. 330 UNTS 38; 21 UST 2517; 7 ILM 1046 (1968) Cmnd 6419. See Article 2 (1). 97 The Hague Rules, Introductory note (p.3)
98 The Hague Rules, See Annex on Model Clauses (p.101) 99 Cernic (n 47).(p.2)
100 Yiannibas (n 1). (p.223)
101 See Board Sounding Consultation, (p.4)
102 Claes Cronstedt and Robert C Thompson, ‘A Proposal for an International Arbitration Tribunal on Business and Human Rights’ (2016) 57 Harvard International Law Journal 66. (p.68)
labour in Bangladesh production chain may serve as an example of how this clause may be useful, given that, according to investigations, Walmart wasn’t able to enforce its Code of Conduct in developing countries.103 Perhaps, such escalation clause may serve as a
safeguard for victims, while at the same time becoming an incentive for subcontractors to abide to their Codes of conduct. It may be further argued that, in the event that there is no contractual clause prior to the dispute, corporations may voluntarily submit the dispute to binding arbitration either in order to comply with their corporate social responsibility, or simply with the intent of avoiding reputational damage.104 Although such assumption
may not be entirely precise or accurate, there are many reasons for which corporations may cooperate to that extent, which mostly deal with the fear of risk their reputation. As a result, ‘escalation clauses’ may shed light on this consent matter and further ensure an accessible remedy to human right victims. As a result, a further question may arise, which is; should these clauses then be rendered mandatory? If we consider arbitration’s main characteristics and in its most strict manner, there should be no space for ‘mandatory clauses’, since, not only would it undermine the party’s autonomy, but also may present a disincentive for corporations. Or perhaps, they should be rendered mandatory because of the complexity, nature, and barriers to be encountered by victims within a BHR context. In this vein, another potential solution might be the establishment of a standing instrument similar to the Bangladesh Accord, meaning that an independent, legally binding agreement would serve as an effective mechanism for guaranteeing employees protection in global supply chains.105
IV. FROM AD HOC TO INSTUTIONAL BASIS. ‘A CALL’ FOR A SINGLE COURT ON BUSINESS AND HUMAN RIGHTS ARBITRATION
In this final section, the paper aims to follow-up for the re-thinking of how the Hague Rules may become more effectively enforced by means of the constitution and further assistance of an institution, namely, a Single Court for business and Human Rights Arbitration. This proposal has been endorsed by several scholars and experts in the field
103 Torres and others (n 2). (p.61)
104 Cronstedt and Thompson (n 102). (p.68) 105 Yiannibas (n 1). (p. 223)
of business and human rights in the past recent years. Thus, the paper aims to present several insights towards the creation of such an institution.
A) Ad hoc Arbitration vs. Institutional Arbitration
Firstly, and in order to support the creation of such institution, it becomes necessary to consider the two main existing types of arbitration; ‘ad hoc’ and institutional Arbitration. Edlira Aliaj provides readers with a nice synthesis on these two figures while offering an overview on both the advantages and disadvantages to be found therein.106 Nevertheless,
it is clearly stated that the use of either kind will ultimately depend on the circumstances, parties and nature of the case.107 It also should be noted that the purposes of this section
is not to offer a comprehensive elucidation of these two figures. Hence, the paper will take into consideration the main features to be considered in order to ascertain which option may better suit and further provide human rights victims with access to effective remedies.
Arbitration is a private and binding dispute resolution mechanism which offers both time and cost savings, as well as the use of an impartial tribunal, alternatively to court litigation. Ad hoc arbitration, in principle, allows for broader flexibility over institutional arbitration. As a matter of fact, within ad hoc arbitration, parties are required to determine and arrange themselves all the aspects of the arbitration proceeding - such as the applicable law to the dispute - while an already established set of rules are to be applied under institutional arbitration.108 Additionally, the use of institutional arbitration may help
to overcome a common problem within international arbitration, which is the problem of arbitrability. For instance, it may be the case where labour disputes are arbitrable under US legal system but not under the French legal system, thus prompting the nationalization of arbitrability and thus resulting in the fragmentation of international human rights law109. Accordingly, the potential shift to an institutionalized procedure may overcome
106 Universiteti i Vlores and Ismail Qemali, ‘Dispute Resolution through Ad Hoc and Institutional Arbitration’ (2016) 2 Academic Journal of Business. (p.241)
107 Ibid. (p. 250) 108 Ibid. (p.243)
the potential controversy to which parties may be exposed when coming to an agreement on the choice of the governing law to the dispute. Furthermore, parties may make use of drawn up rules to be applied to their dispute. De facto, there are multiple set of rules suitable to ad hoc arbitration, of which the UNCITRAL rules are considered most convenient.110 Given that the Hague Rules are mostly based on the UNCITRAL rules, it
becomes clear that they are geared towards the use of ad hoc arbitration. But, would this option be the most suitable for human rights victims?
Conversely, institutional arbitration is to be considered more costly compared to ad hoc, due to the fact that, when submitting a dispute to an institution, parties are no longer free to choose the set of rules to be applied or to further negotiate arbitrators fees and expenses since those are previously fixed by the institution.111 It could then be argued that, while
institutional arbitration allows for higher neutrality, uniformity and efficiency, ad hoc arbitration may result, in principle, less expensive. The notion ‘in principle’ is to be used here since, in practice, ad hoc arbitration may turn out to be more costly. For instance, if the agreement between the parties takes place after the dispute has arisen, cooperation may not always be straightforward and may finally lead to court intervention.
Additionally, within ad hoc arbitration, misinformed decisions of the parties may also imply court intervention and further costs in the long run. By contrast, institutional arbitration allows to save complex negotiation since rules and procedures to be applied are already established. Furthermore, given that arbitrators are appointed by the institution itself, this will further ensure their impartiality, independence and high expertise on business and human rights-related disputes. Expertise which may be revised on a regular basis. Moreover, institutional arbitration grants administrative assistance from the institutional staff in order to address all doubts which may arise from the parties, thus avoiding court intervention.112 Nevertheless, it could be further stated, that the foremost
aspect under institutional arbitration is the possibility for parties to appeal the first award
110 ibid. (p.244)
111 ibid. (p.246) 112 ibid. (p.248)
issued. This would imply that parties are entitled to a second chance while at the same time serving as a mechanism to avoid the release of arbitrary awards.113
Taking into consideration the potential advantages and disadvantages that parties may face under both ad hoc and institutional arbitration, this paper would argue that, although the Hague Rules are modelled on UNCITRAL Arbitration rules (most likely geared towards ad hoc arbitration), institutional arbitration would better suit human rights victims’ access to an effective remedy. Despite the Rules falling within the context of international commercial arbitration, ad hoc arbitration may certainly better suit B2B disputes in practice but would not entirely offer the assistance human rights victims may require in a V2B scenario, especially in the most complex cases. Hence, the Draft Team and Working Group efforts to provide a mechanism as flexible as possible may, at the end of the day, be less beneficial than the establishment of a specialized institution for BHR disputes. This paper will provide further arguments to support a swift change of the Rules to follow an institutional basis, through the consideration of several proposals by scholars geared towards the creation of a single court for BHR Arbitration.
B) The establishment of a single institution within the Hague Rules legal framework
Back in 2014, several scholars released a proposal for the establishment of an international Arbitration Tribunal within the context of business and human rights-related disputes.114 This proposal, opened to criticism and suggestions, has been further endorsed
overtime by some other scholars and experts in the field. Such an institution, namely ‘The Tribunal’, may be settled under the premise that it is essential to provide justice where it is currently missing.115 As a result, serious human rights abuses which are taking place
within corporation’s business activities do not see their day in court because of the absence of independent and functional judicial systems.
Moreover, even where courts from developed countries – such as the US - could potentially offer an effective access to remedy and due process, they usually lack
113 ibid.
114 Claes Cronstedt and Robert C Thompson, ‘An International Arbitration Tribunal on Business and Human Rights’ (2015) 13 Lawyers for Better Business 2000.
extraterritorial jurisdiction as shown in Kiobel. Accordingly, this proposal would provide victims with a forum designed to allow swift and affordable justice to all,116 thus avoiding
any governmental organization’s commitment with national courts and further ensuring a level playing field for the parties at the dispute. The proposal also aims to guarantee the arbitrators’ subsequent expertise, impartiality and independence while at the same time promoting the use of mediation before getting through the arbitration proceeding as the method for an early settlement.
Besides all the main benefits that arbitration offers over court litigation beforehand (i.e time and cost saving, arbitrators expertise, independence, etc), further advantages may come from the establishment of the Tribunal. Most particularly, when it comes to corporations’, to enter into ADR would certainly provide an incentive for them to avoid further reputational harm and to get rid of a flood of accusations (accurate or not) from NGOs. It could then be argued, that the risk of reputational loss is to be considered the prime incentive for businesses to enter ADR, since such reputational damage may take place in several forms. For instance, Coca-Cola’s conflict in India lead to a high loss in consumers trust worldwide whereas Apple’s suffered stock price decreases.117
The Tribunal will also potentially trigger and ensure further endorsement of previous soft law instruments, namely Ruggie’s Three Pillar Framework and the NCP’s better functioning under the OECD Guidelines. According to scholars, given that NCP’s procedure not only differ between the different legal systems but are also not designed as legal procedures providing sufficient guarantees for fair trial, NCP’s may suggest to parties the use of such a qualified institution, prior to the eruption of the dispute.118
Moreover, UNGP’s ‘third leg’, remedy will be further guaranteed to HR victims given that although, they stipulate that States should provide effective and appropriate non-judicial mechanisms alongside the non-judicial ones, there is no explicit vindication on States duty to mandate the use of ADR.119
116 ibid. (p.5)
117 Torres and others (n 2).
118 Cronstedt and Thompson (n 114). Footnote 13 (p.7) 119 ibid.
