In assessing the importance of soft law and voluntary guidelines, banks should consider the extent to which non-binding expectations may harden into mandatory requirements over time. Voluntary standards applicable to corporations, whether drafted by intergov- ernmental organizations or private industry groups, often reflect emerging stakeholder expectations that are frequently predictive of future legal and regulatory requirements. The “hardening” of soft law into hard law can happen in a number of ways.
Soft law can be incorporated into national hard law through several mechanisms. One is by including soft law standards in new legislation that is binding. In the US, for exam- ple, a number of recent legislative and regulatory developments have incorporated the expectations of human rights due diligence and transparency found in the UN Guiding Principles. These developments include the enactment of the California Transparency in Supply Chains Act,216 which requires certain companies to make public disclosures regarding what actions, if any, they are taking to address the risks of human trafficking and slavery in their product supply chains. This reflects the due diligence approach that the UN Guiding Principles outline. The UK Government has enacted similar legislation via the Modern Slavery Act that also places a requirement on larger companies to report on measures taken to prevent human trafficking in their businesses and supply chains. Another example is Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which directed the Securities and Exchange Commission to issue a rule defining disclosure requirements for securities issuers who use certain “conflict minerals,” with a view to limiting the role played by such minerals in fuelling the ongoing conflict in the Democratic Republic of Congo.217 The issuers were required to report on the “due diligence” they undertook to identify whether such minerals entered their supply chains, which helped harden the concept that companies should conduct due diligence on certain human rights issues. Finally, the Reporting Requirements on Responsible Investment in Burma218 require that U.S companies doing business in that country submit an annual public report to the US State Department including information on the poli- cies and procedures they have in place to manage human rights.219 The reporting require- ments suggest that companies examine the UN Guiding Principles and the human rights provisions of the OECD Guidelines in order to develop such policies and procedures. In the EU, the European Commission has called on EU Member States to develop national action plans for implementing the UN Guiding Principles. The UK, The 216. California Transparency in Supply Chains Act of 2010, Cal. Civ. CodeseCtion 1714.43 (2010).
217. Dodd-Frank Wall Street Reform and Consumer Protection Act, section 1502, Pub. L. No. 111-203, 124 Stat. 1376 (2010).
218. uS depArtmentof StAte, Reporting Requirements on Responsible Investment in Burma (July 11, 2012),
available at www.humanrights.gov/wp-content/uploads/2012/07/Burma-Responsible-Investment- Reporting-Reqs.pdf.
219. US companies must also submit annual information regarding the human rights risks or impacts identified during due diligence processes and the steps that the company has taken to mitigate them, although this information will not be made public.
Netherlands, Italy, Finland, Lithuania, Norway, Sweden, and Denmark have already devel- oped such plans,220 and the EU has reported that a large number of countries intend to develop such plans in due course.221 Indeed, 26 additional countries, including a number outside the EU, have drafted or announced their intention to develop national action plans. 222 These action plans reflect the duty of governments to protect human rights in part through the establishment of laws and regulations governing business activities. In the UK’s plan, the Government notes that “[t]he UK has specific laws protecting human rights and governing business activities. …Like all States we need to continually re-assess whether the current mix is right, what gaps there might be and what improvements we can make.”223 One way in which the UK has sought to address perceived “gaps” is to issue new regulations requiring listed companies to make disclosures addressing “social, community, and human rights issues” in public strategic reports.224
Soft law and voluntary guidelines may also harden by informing judicial decisions in such a way as to become a standard of conduct that defines liability. One example of this is the Ontario Superior Court of Justice’s recent decision in Choc v. Hudbay Minerals
Inc.225 This decision, while only preliminary, signaled a willingness to allow Canadian businesses to be held liable in Canadian courts for human rights abuses commit- ted outside of Canada. In doing so, and without yet reaching the merits of the case, the Court cited the UN Guiding Principles, the OECD Guidelines for Multinational Enterprises, and the Voluntary Principles on Security and Human Rights in its discus- sion of “international norms, authorities and standards” that “support the view that a duty of care may exist in circumstances where a company’s subsidiary is alleged to be involved in gross human rights abuses.”226 Observers frequently cite this decision as an example of how soft law may inform how courts define the duty of care when determining questions of liability.
Soft law influences legal analysis in other ways, particularly in civil law jurisdictions, and can affect the outcome of rulings, thus creating new hard law. For example, the Supreme Court of Belize ordered the government to obtain the consent of affected indigenous peoples before it issued concessions for natural resource extraction on their land. The Supreme Court’s reasoning relied heavily on the UN Declaration on the Rights of Indigenous Peoples – generally considered to be soft law – and, to a lesser degree, ILO Convention 169, even though Belize has not ratified the latter.227
Companies themselves can cause soft law to harden in specific instances. For example, when EPFIs and the IFC incorporate voluntary standards into project finance contracts, their “voluntary” standards become mandatory for the loan recipients.
At the international level, soft law can harden through incorporation into treaties. Notably, in June 2014, the UN Human Rights Council adopted a proposal, originally put forward by Ecuador, and co-sponsored by Bolivia, Cuba, South Africa, and Venezuela, to establish an intergovernmental working group to negotiate a treaty on business and 220. europeAn CommiSSion, Business and Human Rights, National Action Plans, available at http://ec.europa.eu/
enterprise/policies/sustainable-business/corporate-social-responsibility/human-rights/.
221. Statement by the European Union, UN Human Right Council Forum on Business and Human Rights (Geneva, 3 December 2013), available at http://eeas.europa.eu/delegations/un_geneva/documents/ eu_statments/human_right/2013-1203_forum_buz_hr-panel-i.pdf.
222. For an up-to-date list, see National Action Plans, Business and Human Rights Resource Centre, available at http://business-humanrights.org/en/un-guiding-principles/implementation-tools-examples/ implementation-by-governments/by-type-of-initiative/national-action-plans.
223. her mAJeSty’S government, good BuSineSS – implementingthe un guiding prinCipleSon BuSineSS
And humAn rightS (September 2013), available at https://www.gov.uk/government/uploads/system/
uploads/attachment_data/file/236901/BHR_Action_Plan_-_final_online_version_1_.pdf. 224. The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, available at
http://www.legislation.gov.uk/ukdsi/2013/9780111540169. 225. Choc v. Hudbay Minerals Inc., 2013 ONSC 1414. 226. Id. at 32.
227. Cal v. Attorney General of Belize, Nos. 171 & 172, (Belize 18 Oct. 2007), available at https://www.law. arizona.edu/depts/iplp/adovaccy/maya_belize/documents/ClaimsNos171and172of2007.pdf.
human rights. The mandate of the working group is to “to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises.”228 Although several EU Member States, the US, and a number of other countries voted against the proposal, the initiation of the process reflects ongoing international concern regarding the human rights responsibilities of companies. Such a treaty instrument would reflect a signifi- cant “hardening” of the soft law normative expectations and standards discussed in this Chapter.
The process through which international soft law and voluntary guidelines harden – or do not – is not linear or fixed. The recent developments in US regulations, EU national action plans, and the UN Human Rights Council’s approval of a process to negotiate a treaty on business and human rights suggest that one of the primary concepts in the UN Guiding Principles is hardening at least slightly — namely, that companies should identify and address their human rights impacts.